Trump’s obsession with Canadian milk

We know by now that Donald Trump’s bonnet has a very large number of bees. Several of his unshakeable beliefs relate to economics and all of them are highly dubious. One is that budget deficits are bad (unless they are caused by tax cuts for the wealthy) and another is that any trade deficit with any country is bad. He also seems to think that there is close relationship between the two. He also seems to believe that if any country has a trade surplus with the US, it must be because they are indulging in unfair trade practices such as currency manipulation, or providing subsidies for their domestic manufacturers and producers so that they can undercut the prices of US producers, or they are imposing tariffs to make US goods more expensive.

It is not that all of these beliefs are flat-out wrong. Every country, including the US, indulges in some of these practices some of the time for some of their products. It is that Trump thinks that any country that has a trade surplus with the US can only achieve that using deeply crooked means and is ‘taking advantage’ of the US. His way of trying to rectify things is to impose tariffs on a range of imported goods and he seems to think that these tariffs are paid for by the countries from whom we are importing goods. This may be the source of his belief that by imposing tariffs, we will not only change trade deficits into surpluses, those countries will be contributing to reducing the budget deficit. This is obviously not the case. The cost of the tariffs will be paid by US consumers.

He seems particularly irked by Canada, with him and his advisors using extremely strong language denigrating the US’s longstanding ally.

On Fox News Sunday, White House Director of Trade Policy Peter Navarro also defended the president with adversarial language.

“There’s a special place in hell for any foreign leader that engages in bad faith diplomacy with President Donald J. Trump and then tries to stab him in the back on the way out the door,” Navarro said. “And that’s what bad faith Justin Trudeau did with that stunt press conference. That’s what weak, dishonest Justin Trudeau did. And that comes right from Air Force One.”

“Fair Trade is now to be called Fool Trade if it is not Reciprocal,” [Trump] tweeted. “According to a Canada release, they make almost 100 Billion Dollars in Trade with U.S. (guess they were bragging and got caught!). Minimum is 17B. Tax Dairy from us at 270%. Then Justin acts hurt when called out!”

Did you notice Trump’s reference to Canadian dairy products? That particular item seem to really get Trump’s goat and he refers to it constantly when talking about trade with Canada. John Barber explains why Canadian milk infuriates Trump.

Whatever understanding Canada and the US may (or may not) have come to on their high-value trade in lumber or auto parts, they remain implacably opposed on the comparatively minor matter of milk.

Trump has attacked Canada’s protected dairy industry before, calling it a “disgrace” and blaming it for widespread hardship among US farmers. Although the entire trade in dairy products between the two countries is worth less than US$600m, ideological division has sharpened the ongoing dispute. His negotiators have demanded the dismantlement of Canada’s openly dirigiste system of supply management in agriculture – a complicated nexus of production quotas and import tariffs designed to ensure Canadian dairy, egg and poultry farmers receive fair prices for their products.

But the Canadians are no less determined to retain one of the last vestiges of their otherwise-abandoned collectivist traditions. Canadian cows are sacred, and the farmers who care for them enjoy outsized influence in national politics. Expert observers have said that Justin Trudeau’s government would abandon the treaty altogether before sacrificing supply management.

Meanwhile, just across the St Lawrence river in what free-trading Americans like to call Soviet Canuckistan, the dairy industry is thriving like never before – and like none other in the developed world. Family farms milking an average of 80 cows each have prospered under a heavily regulated system that supports prices at sustainable levels by restricting domestic overproduction and keeping imports at bay. In 2016, Canadian farmers received an average price of C$0.79 a litre for milk, compared with C$0.49 on average for US farmers.

The result is that dairying remains a key economic support of traditional rural life throughout central Canada. As critics of the system like to point out, hoping to inspire resentment among consumers annoyed by the price of milk, Canadian dairy farmers enjoy incomes 60% above average in the country. But to supporters, the uniquely prosperous, protected Canadian dairy industry stands as a model alternative to the increasingly disruptive and unpopular dynamic of unrestricted free trade in all things.

Domestic critics have called supply management a grotesque distortion of free-market principles, complaining that the comparatively high price of Canadian milk sacrifices the interests of consumers in favour of producers and victimizes the poor. But no consumer or social policy group has taken up the cause, and all six parties currently represented in the House of Commons unanimously support supply management.

As do Canadian consumers: an Ipsos poll this year by the Dairy Farmers of Canada reported that 75% of Canadians support even greater government efforts to defend the industry in the face of current US demands.

Every country has certain manufacturers and industries that it sees as either emblematic of the nation (like Harley Davidson for the US) or whose health is correlated with the health of the economy in general (like the auto industry for the US) and goes out of its way to protect, and the US is no exception. In addition, sugar, wheat, and beef producers also enjoy outsize influence in the US. For Canada, dairy products are their thing. As long as the list of products for each country is not too extensive, those are taken as part of the game

John Oliver devoted the main part of his show on Sunday to look at the facts about trade.


  1. Pierce R. Butler says

    … Trump thinks that any country that has a trade surplus with the US can only achieve that using deeply crooked means and is ‘taking advantage’ of the US.

    What then would Trump™ say if told the US had a trade surplus with some other nation?

    (Yeah, I know: Crooked Hillary is colluding with the Russians to drive the 17 Angry Democrats’ rigged witch hunt, because of jealousy that the world’s largest crowd ever came out to admire his big hands at his inauguration…)

  2. Mano Singham says


    Trump would say that having a trade surplus is just as it should be because obviously America makes everything the best.

  3. jrkrideau says

    How much does milk cost in the USA?
    I think I paid roughly $CDN 5.50 for 4 litres a couple of weeks ago.

    Given the pampering and loving care our cows get, we realize we may have to pay a bit more to keep Bossie in the style to which she has become accustomed.

    On a more serious note, touching dairy supply management would lose some very key ridings, especially in Ontario and Québec, for any party that advocated it, let alone wiped it out.

  4. Pierce R. Butler says

    Mano Singham @ # 3: … obviously America makes everything the best.

    Well, damn, then, why do we import anything? Close the borders!

  5. Jenora Feuer says

    And yet, the already scandal-prone Maxime Bernier has not only left the Conservative party (on the day they were starting their party convention) and indicated he wants to form his own political party, he’s also indicated that he thinks supply management should be on the chopping block. Multiple times, including when he was running for the party leadership, and he believes that his advocacy for that was why he lost. (He may not be entirely wrong on that part.)

    He seems to lean pretty heavily libertarian in general, so this would be all of a piece with that.

    He’s also made comments about ‘radical multiculturalism’ and the ‘cult of diversity’, so…

  6. jrkrideau says

    He’s also made comments about ‘radical multiculturalism’ and the ‘cult of diversity’, so…
    Maxime Bernier is turning into a rather nasty piece of work. Next he will be issuing ringing cries to les Québecois de souche and la Muette will be endorsing him.

    I think he has always been more libertarian than Con but it is coming out more. He seems to have basically inherited his seat from his father. Loyalty to Con principles was probably secondary in gaining the seat.

    He is consistent on the supply management issue and quite likely is correct about its earlier effect. When you are an MP from a heavily dairy area and IIRC the Beauce is such, campaigning on a policy that threatens a lot of people’s livelihood and way of life is, perhaps, a bit counterproductive?

    I just had a look at the Canadian Dairy Commission site. Québec followed fairly closely by Ontario are overwhelmingly the main dairy provinces. “About 82.2% of Canada’s dairy farms are in Ontario and Quebec”.
    Between the farms and the processing & distribution arms, it is a huge industry. Bernier wants to threaten it? I bet the local Co-ops are selling out of pitchforks as I type.

    How many rural Con ridings would vote Liberal or even NDP if the Cons start advocating abolishing supply management?

  7. Mano Singham says

    jrkrideau @#8

    Currently the price of a quart of milk in the US is about US$0.60 in Cleveland.

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