18 September 2026, 07:45 UTC

Canada's 15-50% retaliatory tariffs hit US cheese and whey as milk output climbs

Canada began enforcing retaliatory tariffs of 15% to 50% on US goods including cheese and whey two weeks ago, USA Today reported. The measures land as USDA raises its 2026 milk production forecast to 237.2 billion pounds and cheese and butter prices sit well below year-ago levels.

Canada began enforcing retaliatory tariffs of 15% to 50% on a range of United States goods two weeks ago, with cheese and whey among the items covered, USA Today reported. The measures answer the Trump administration's tariffs on imports from Canada, and they land on a US dairy complex that is expanding output faster than domestic demand is absorbing it.

Supply keeps building

The US Department of Agriculture raised its 2026 and 2027 milk production estimates in the Sept. 11 World Agricultural Supply and Demand Estimates report, after the latest Milk Production report showed higher cow numbers and higher output per cow for both years.

2026 production and marketings are projected at 237.2 billion pounds and 236.2 billion pounds, each raised by 600 million pounds from the previous month's report. Both would be up 5.5 billion pounds, or 2.4%, from 2025.
2027 production and marketings are projected at 238.6 billion pounds and 237.6 billion pounds, also up 600 million pounds each, and 1.4 billion pounds, or 0.6%, above 2026.

Culling has not slowed the expansion. Dairy cow slaughter over the past two months ran about 4.5% ahead of a year ago. USDA's latest weekly slaughter report counted 52,400 dairy cows sent to slaughter in the week ending Aug. 29, up 200 head or 0.4% year over year. The year-to-date total reached 1,810,900 head, up 73,300 or 4.2%.

Cheese and butter prices under pressure

Cash block cheddar closed at $1.46 per pound on Friday, Sept. 11, down half a cent on the holiday-shortened week and 23 cents below a year earlier. Barrels finished at $1.4625, down 7 cents for the week, the lowest since June 23 and 23.75 cents under last year. Sales totaled seven loads of block and 10 of barrel.

Butter fell to $1.37 per pound on Sept. 10, the lowest Chicago Mercantile Exchange price since Jan. 16, and held there on Sept. 11, leaving it 7 cents lower for the week and 65.25 cents below a year ago. The exchange recorded 72 sales for the week and 386 during August, up from 316 in July.

Grade A nonfat dry milk moved the other way, closing Sept. 11 at $1.97 per pound, the highest since June 8, when it stood at $2, and 75 cents above a year earlier, on 10 sales for the week. HighGround Dairy noted that skim milk powder priced above whole milk powder at the Global Dairy Trade Pulse auction for the first time since 2022, citing concerns about a super El Nino that could cause severe drought in New Zealand along with a tight balance sheet for skim solids and protein.

Whey remains the export engine

Dry whey closed Friday at 76 cents per pound, up 0.75 cents for the week, the highest since Dec. 12, 2025, and 19.5 cents above a year ago. Sarina Sharp of the Daily Dairy Report, writing in the Sept. 4 California Milk Producers Council newsletter, said production of dry whey for human consumption topped prior-year volumes by 18.7% and is up 12% year to date, while dry whey exports jumped 75% year over year in July. Year-to-date whey powder exports are at a record, up 57% from the first seven months of 2025, and grew nearly three times faster than output from January through July. Sharp attributed the strength to robust international demand, particularly from China, which has pushed CME spot whey powder to calendar-year highs.

Regional trade and demand signals

Dairy Market News reported cheese production running steady in the West on strengthening milk volumes, while food-service and domestic demand stayed soft and conventional cheese ads rose 23% two weeks ago as retailers pushed promotions. Contacts pointed to fourth-quarter export growth from the West, particularly to Asia and Mexico, with cheddar dominating. Central region supplies tightened slightly on warmer temperatures, with Class I processors drawing milk away from Class III production and some plants offering spot milk at discounted prices around the Labor Day holiday. Dairy Market News repeatedly flagged evolving global trade conditions and geopolitical uncertainty as potential market risks.

CoBank said the US is accelerating efforts to raise protein content in milk to align with global demand trends and keep pace with export competitors, noting that butterfat levels have risen sharply over the past decade while gains in protein have been comparatively modest.

Expert commentary

“Canada's tariffs of 15% to 50% hit cheese and whey at the worst possible moment for US processors. USDA has just raised 2026 milk production to 237.2 billion pounds, 2.4% above 2025, and added another 600 million pounds to the 2027 forecast. Culling is not absorbing the growth: 1,810,900 head year to date, 4.2% more than last year, and output per cow keeps rising. That milk has to find a buyer.

Cheese shows the damage first. Blocks at $1.46 and barrels at $1.4625 are 23 cents below last year, and barrels are the cheapest since June 23. Losing tariff-free access to the nearest large buyer pushes more cheddar toward Asia and Mexico, where it competes on price alone. Butter at $1.37 is the lowest since January and 65.25 cents under a year ago, so that market offers no cushion either.

Whey is the one line holding up. July exports were up 75% year over year, year-to-date volumes are a record and 57% above 2025, and spot dry whey at 76 cents is the highest since December. China is doing that work, not Canada. The exposure is concentration: processors are covering a soft domestic market and a taxed northern border with one buyer's protein appetite. If Chinese demand cools while milk output keeps climbing, cheese and butter are in no shape to take the overflow.”

Eleanor Hayes

Lead Trade Policy Analyst