Canada Puts 25% On All US Cheese: Cheddar And Mozzarella Now Pay Duty Inside The USMCA Quota

Most of the coverage reads this as a farm price story. I read it as a quota story. Canada put a 25% charge on all US cheese from 8 September. The charge lands inside the duty free quota, where US cheddar and mozzarella have paid nothing for six years.

What Canada did, and when

The Government of Canada issued the United States Surtax Order (2026) on 4 September. Canada Border Services Agency confirmed it in Customs Notice 26-23 on 7 September. The order took effect at 12:01 a.m. on 8 September. It covers about $27.6 billion of US goods at rates of 15%, 25% or 50%.

All US cheese pays 25%. Whey, casein, milk protein and milk powders pay 50%. Butter, fluid milk, cream, yogurt and ice cream pay nothing. Canada left those off the list on purpose.

The charge lands inside the quota

This is the part most reports skip. USMCA opened 14 dairy quotas. They give the US duty free access to about 3.5% of Canada's dairy market, phased in through the late 2030s. Cheese inside those quotas has entered Canada free of duty since the deal began.

The quota volume has not changed. The price of using it has. Canada's old over quota rates still sit at roughly 241% to 298%. Nobody pays those. They exist to stop trade above the quota. The new 25% is different. It sits on the trade that actually happens.

What actually crosses the border

US dairy sales to Canada were about $1.3 billion in 2025. That is 14% of all US dairy exports, second only to Mexico. Cheese was $134 million of it. Whey and milk protein were $82 million.

US cheese sales to Canada have grown fast. They went from 19.3 million pounds in 2019 to 51.4 million pounds in 2025. Butter is the biggest single line at $228 million. Neither side taxed butter, because Canada is short of butterfat.

How a 25% charge reaches a milk cheque

Cheese that cannot be sold in Canada has to go somewhere. Some finds a home in Mexico or South East Asia at a lower price. Some stays home and pushes US cheese prices down.

The Class III milk price is built from cheese and dry whey prices. Those are the two lines Canada taxed. A one cent fall in the cheese price cuts Class III by about ten cents. A one cent fall in dry whey cuts it by about six cents.

University of Wisconsin Extension puts the lasting effect at 20 to 35 cents per hundredweight of milk. For Wisconsin that is roughly $65 million to $113 million a year. That is $51 to $90 a cow. About 90% of the state's milk goes to cheese.

The US escalated on the same day

On 8 September the White House signed five more orders under Section 338. Three of them bar certain Canadian cars, dairy and drinks from entering the US at all. That starts on 29 September. Goods already imported before then still pay the 50% duty instead.

USMCA origin gives no shelter here. Two further orders widen the scope of the July duties from 15 September, adding more dairy lines. Section 338 comes from the Tariff Act of 1930. This is its first big outing in the current cycle.

Relief exists, but you have to claim it

Goods in transit on 8 September escape the charge. Importers need the paperwork to prove it. Cheese brought into Canada under an Import for Re-Export permit is also exempt, once every condition is met.

Duties Relief and Duty Drawback both cover the surtax. Neither one applies on its own. No agency reports how much trade uses them. So every exposure figure published this week sits before relief.

Check every Canadian order against the tariff item rather than the product name. Model the landed cost with the 25% on top. Ask your buyer who carries it. File for relief now if you ship for further processing. Watch the National Dairy Products Sales Report through October, because displaced cheese lands there first. Then watch the September export data, which lands in late October.

We will be watching where those 51 million pounds go next. Canada and the USA are both modelled separately in our Global Cheese Database 2026. Cheddar and mozzarella are tracked as their own types, in tonnes, from HS 0406 customs data. Waitlist members get a free sample country chapter.