The controversy centers on Canada’s Milk Class 4 pricing mechanism, which allows domestic processors to access low-cost milk ingredients and export high-value milk proteins at prices below production costs. Joint modeling by the Dairy Companies Association of New Zealand (DCANZ), alongside US and Australian export lobbies, estimates that subsidized Canadian exports cause annual losses of $257 million for New Zealand exporters alone by artificially depressing international prices for milk protein concentrates.

Although a May 2026 investigation by the US International Trade Commission (ITC) substantiated these concerns—finding that Canadian exporters remain competitive internationally solely due to government pricing subsidies—subsequent US policy actions have bypassed the root cause. The Trump administration recently proposed a 50% tariff on Canadian dairy imports; however, DCANZ Executive Director Kimberly Crewther pointed out that the executive order focuses strictly on USMCA quota administration rather than structural export pricing.

Industry leaders warn that US import tariffs will do little to protect global markets outside North America. While high tariffs may block Canadian dairy products from entering the American market, they fail to prevent subsidized Canadian proteins from displacing non-subsidized New Zealand exports across third-party markets in Asia, Latin America, and the Middle East, where commercial competition remains intense.