Talks between Washington and Ottawa ended without a deal, and both sides have escalated. The US moved first, adding a 50% duty to a list of Canadian goods on 22 August, with named lines covering SMP and NFDM, whole milk powder, whey, MPC and higher proteins. Canada follows on 8 September with 50% on the same US product groups and 25% on cheese. The US list leaves cheese out.
Measured against what US plants actually make, most of these flows are small. First-half shipments to Canada equal 0.8% of US milk powder production, 4% of dry whey, WPC and MPC output, and 0.3% of cheese. Canada also buys only a small share of total US exports in most of these groups.
Higher proteins are the exception. Canada takes 14% of US exports in that group, so the duty lands on a real outlet rather than a marginal one. That is where to watch for pressure on US prices. Elsewhere the volumes are too small a share of production to move the domestic balance on their own.
Running the other way, whey and MPC carry the largest two-way exposure. The US takes 60% of Canada’s exports in that group, and Canada supplies 29% of US imports, equal to about 6% of US output of dry whey, WPC and MPC. If Canadian volumes into the US fall away, New Zealand is already the largest supplier serving that market. Canadian shipments of whey and modified whey into the US ran ahead of the previous four years through June, so there is real volume in play.
Two effects pull in opposite directions from here. More US product left at home would weigh on domestic prices, mainly in higher proteins, while tighter access to Canadian whey and MPC would work the other way for buyers who use them.
The tariffs land on a market already moving. Cheese blocks on the CME slid from $1.6000 last Friday to $1.4950 by Thursday’s close, with barrels steadier at $1.5750, on high production after recent expansions and softer consumption. Butter closed at $1.4600 and Vesper expects it to stay weak and plentiful over the coming months. NFDM went the other way, closing at $1.8500 on domestic tightness that has pushed US prices to roughly a $500/mt premium over the rest of the world. Dry whey closed at $0.7300.
Underneath all of it, the milk keeps coming. The 24 major states produced 19.4 billion pounds in July, up 2.3% year on year, with Texas up 4.4% on 26,000 more cows and 15 more pounds per cow. Butter stocks are still below last year at 321.4 million pounds, but the gap has closed from 8% down in May to 3% in July. With margins comfortable and cows still being added, the open question is what gets made with the extra milk, and where it finds a home.
