Tariffs in North America could reshape global trade in dairy products

The Dairy Sector at the Center of a Trade Dispute

Trade tensions in North America are rising again. On July 20, the United States announced a 50% tariff on a broad list of Canadian goods with a total import value of approximately $20 billion. The list includes, among other items, milk and cream, and dairy products have been identified as one of the three main points of contention, alongside alcohol and the automotive industry. The tariffs will take effect on August 19, so both sides still have a month to negotiate. The dispute comes at a time when the region’s existing trade agreement has expired and new terms of cooperation are still being negotiated.

The timing of this decision is also significant. Global dairy prices have been falling for several weeks, and the latest GDT auction ended with a 4.9% decline amid strong supply and cautious demand. Added to this is the heatwave in Europe, which is limiting milk production. In some key countries, milk procurement has recently been several percent lower than a year ago. Thus, trade policy is compounding the effects of falling prices and reduced milk supply.

Trade flows will shift direction

In practice, such high tariffs do not stop trade; they merely redirect it. Instead of going to the U.S., Canadian dairy products will begin seeking buyers in other markets. American cheeses, in turn, may face an uphill battle in Canada. The effects of these shifts will also be visible in other markets: some categories will see additional supply, while others will face stiffer competition. For buyers of milk powder, butter, or cheese, what will matter most are the wider price differences between regions and less predictable product availability—not individual price fluctuations.

In the coming weeks, the market will be watching to see if an agreement is reached before August 19 or if Canada responds with its own tariffs. It will also be important to see how prices change once the first shipments begin arriving in new markets. In the current situation, political decisions may influence prices more quickly than supply and demand.