The United States continues to prioritize securing greater access to Canada’s dairy market amid persistent challenges facing its domestic dairy industry. Discussions between Canadian officials and dairy processors in late 2025 highlighted considerations around modifying Canada’s import licensing rules, but Washington maintains that expanding dairy trade opportunities remains a key objective.

U.S. Trade Representative Jamieson Greer identified Canada’s supply management system as a focal point in the ongoing review of the United States-Mexico-Canada Agreement (USMCA). Shawna Morris, executive vice-president of trade policy and global affairs at the National Milk Producers Federation and the U.S. Dairy Export Council, emphasized that addressing dairy market access is a “high priority” for both the White House and Congress. Morris criticized Canada’s dairy policies for undermining the intent of the USMCA, triggering sustained bipartisan opposition in the United States aimed at resolving these trade issues.

The urgency stems from broader trends within the U.S. dairy sector. Milk production in the United States increased by 2.8 percent in 2025—the largest rise in two decades—driven by both higher cow productivity and a nearly 10-million-strong dairy herd, the largest in 30 years. Investment in processing capacity is also expanding, with $12 billion committed to over 50 projects in 19 states expected to come online by 2028. However, domestic dairy consumption remains essentially flat, having peaked in 2021 and reverted to near 2018 levels, creating a surplus that pressures producers to seek export markets.

Exports have become vital to the industry’s health, with U.S. dairy shipments growing 15 percent over the past decade to reach $9.4 billion in 2025. Mexico stands out as the fastest-growing export destination, accounting for 61 percent of export growth and nearly a third of all U.S. dairy exports last year. Additional focus markets include Taiwan, Vietnam, the United Kingdom, and various Southeast Asian countries.

Despite this expansion, entering and expanding in global dairy markets remains fiercely competitive. The sector is dominated by five major exporters—the U.S., New Zealand, the European Union, Argentina, and Australia—all of whom are increasing production. Global milk output rose 5.2 percent in 2025, one of the steepest supply increases recorded, contributing to price pressures worldwide. Industry analysts warn that although growth rates may slow, abundant milk supplies will likely keep prices low.

Economic pressures on U.S. dairy farmers are acute. Rising input costs for insurance, energy, labor, and other essentials, combined with recent milk prices below production costs, have placed many farms under considerable strain. University studies project that milk prices in the coming year will remain below the breakeven point for average farms, risking further financial losses. Some producers have offset challenges through strong beef prices and low feed costs; however, experts caution these conditions are cyclical and may not sustain long-term stability.

Given these conditions, any opportunity to increase access to the Canadian dairy market carries significant weight for U.S. producers. Though Canada represents a smaller export destination compared to others, its proximity offers a competitive transportation advantage. U.S. economists note that where logistical efficiency allows, expanding exports—even into smaller markets—can provide meaningful relief to an industry navigating global oversupply, intense competition, and narrowing margins.