Agriculture Secretary Tom Vilsack on Monday left open the possibility of retaliatory tariffs against Canada for again making what the U.S. sees as an unacceptable proposal to alter its dairy quota system.

U.S. dairy groups are calling for the tariffs, but Vilsack said he hoped the fact that he made it clear that the U.S. was not satisfied with Canada’s latest proposal would be sufficient to prod Canada to make the necessary changes.

“The first step of the process was actually to convey to Canada the level of disappointment and frustration we have, in the hope that may cause a bit of rethinking on their part before it’s necessary for us to take the next step,” Vilsack told reporters Monday.

Vilsack said he’s had two recent conversations with Canadian Agriculture Minister Marie-Claude Bibeau – one more than a week ago and the second time on the sidelines of a G7 summit in Germany this weekend – to tell her the Canadian proposal is not acceptable.

Canada on Monday published its second version of a proposal to address a December ruling from a three-member USMCA dispute panel that agreed Canada was manipulating its dairy quotas. Canada published its first, or preliminary, proposal in March, which also received sharp criticism from the U.S.

On Monday the International Dairy Foods Association, U.S. Dairy Export Council and National Milk Producers Federation all called for retaliation.

“Unfortunately, Canada simply refuses to institute real reform, and such actions must have consequences,” USDEC President and CEO Krysta Harden said. “Retaliatory tariffs are both fair and necessary in this circumstance, as clearly provided for by USMCA.”

And IDFA President and CEO Michael Dykes said, “Canada continues to deny U.S. dairy products from reaching their full capacity under the terms of the deal and continues to deny the existence of any obligations. IDFA thoroughly rejects the Canadian policy published today and demands a swift response from USTR.”

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But Vilsack did not comment directly on the possibility of tariffs when pressed by reporters.

“I would say that I’m hopeful that the nature of my conversation with the Canadian minister underscores the significant level of disappointment … and Canada is capable of reading between the lines in terms of what’s next and maybe what’s next doesn’t have to happen,” Vilsack said.

Canada, Vilsack stressed, is not buying nearly enough dairy from the U.S., and Ottawa continues to insist that Canadian retailers – major sellers of U.S. dairy products like cheese – be excluded from the quotas that were drafted during USMCA negotiations.

For now, Vilsack said, he and U.S. Trade Representative Katherine Tai are waiting to see the Canadian reaction to the the sharp criticisms of the Canadian proposal.

“I can assure you that we’re not going to give up on this,” Vilsack said.

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