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Doud: Section 338 Tariffs Are Trump ‘Creating Leverage’ to Break Canada’s Dairy Quota Games

In a wide-ranging AgriTalk conversation with host Chip Flory, National Milk Producers Federation President and CEO Gregg Doud sizes up the new Section 338 tariffs on Canada, the USMCA review, a ‘transactional’ reset with China ahead of President Xi’s Sept. 24 visit, and the new 25% Section 301 duties on Brazil.
 

Analysis  ·  July 23, 2026

Ambassador Gregg Doud, president and CEO of the National Milk Producers Federation and formerly the Chief Agricultural Negotiator at the Office of the U.S. Trade Representative (2018-2021) — where he worked hand-in-glove with USTR Robert Lighthizer on the USMCA and the Phase One agreement with China — told AgriTalk’s Chip Flory Thursday (July 23) that the White House’s decision to dust off Section 338 of the Tariff Act of 1930 against Canada is, at bottom, a negotiating play: “It’s all a negotiation… President Trump — we saw it when I was there in the first term, and we’re seeing it again — he is a master at creating leverage to use in negotiations. And that’s what this is.”

“We don’t give up on stuff like this. We’re not rolling over. It has to be fixed.” — Gregg Doud, on Canada’s administration of its USMCA dairy quotas

Table 1. Four trade fronts covered in the interview. Source: AgriTalk; USTR; White House.

Canada and the Section 338 gambit

Flory opened by asking whether the White House move earlier in the week to invoke Section 338 tariffs on Canada “makes sense” to Doud. Doud’s answer was unequivocal: this is pressure in service of a deal. “We’ve got some things from USMCA that need to be fixed,” he said, and the tariffs are about “turning up the temperature a little bit to see if we can get some things fixed.”

What strikes Doud most is Canada’s posture. “The Canadians just started talking. They haven’t engaged in the conversation,” he said. “That’s what they did the first time around with USMCA. My boss, Ambassador Lighthizer — we went down to Mexico, we did the deal, and then we told the Canadians, we’re going on without you. So it’s really odd to me that the Canadians have put themselves in the same box again here with their lack of engagement.”

Background. On July 20, President Trump signed three proclamations imposing an additional 50% duty on Canadian dairy products, alcoholic beverages and motor vehicles, effective Aug. 19, under Section 338 of the Tariff Act of 1930 — a Depression-era provision, essentially dormant for decades, that authorizes duties of up to 50% against countries found to discriminate against U.S. commerce. USMCA qualification does not shield covered goods (however key U.S. imports like potash are exempt via the USMCA). The dairy proclamation’s stated justification tracks the industry’s long-running complaint: Canada’s tariff-rate quota (TRQ) system grants access to entities that will not use it, while comparable European exporters get workable retail access. The move is the administration’s first major use of Section 338 and comes after the Supreme Court’s February 2026 ruling invalidating the IEEPA-based tariffs pushed the White House toward older statutory authorities.

The dairy TRQ grievance

Asked by Flory what exactly the U.S. wants changed — “It’s gotta have something to do with the tariff rate quotas and lack of compliance under USMCA” — Doud walked through the mechanics. “We negotiated a tariff-rate quota — there’s a certain quantity that comes in at zero tariff, and once that quantity has been imported by Canada in a certain dairy product, then the tariff goes up… to make it more difficult, not impossible, for more than that initial quantity to come in,” he explained. “What Canada does in dairy is unique, I think, to anywhere else in the world — they allocate that TRQ to entities in Canada who have no interest in using it.”

“The Canadian line is very clever,” Doud continued. “Well, why do you want an increase in the quantity of the tariff-rate quota when you’re not even using what you have now? Well, no — we’re not using it because you’re intentionally giving it to people in Canada that have no intention, no need, no desire to import dairy products from the U.S. That’s not what was negotiated in USMCA. They clearly know that, but they persist.”

Doud reserved his sharpest words for Canada’s decision to write its negotiating position into statute: “They passed a federal law in Canada that prohibits their negotiators from increasing the size of the quantity of the tariff-rate quota,” he said. “I know of no one in the history of the world that’s ever done anything like that in ag trade. That’s really, really remarkable.”

Flory pressed the practical point: “They really don’t need to increase the TRQ — they just need to hand it out to entities that will actually use it.” Doud: “That is exactly what we’re asking for… We’re not asking them for an increase in the quota. We’re just asking them to implement it the way it was supposed to be implemented. And they know they have to.” Asked the odds Canada moves, Doud predicted the fight goes to the top: “Based on what we did the last time around, this is a conversation that’ll go past [USTR] Jamieson Greer — probably up to the top. This is very politically sensitive in Canada.” And he noted the issue is personal for the president: Lighthizer “was really well versed on this and really dug in,” and Trump “knows that we’re being wronged by Canada” — an “old burr under the saddle.” Then the line that sums up the U.S. position: “We don’t give up on stuff like this. We’re not rolling over. It has to be fixed.”

Background. The law Doud references began as Bill C-282, which passed Canada’s House of Commons in June 2023 but died in the Senate when Parliament was prorogued in January 2025. Its identical successor, Bill C-202, passed both chambers and received royal assent on June 26, 2025. It bars Canada’s foreign minister from agreeing to any TRQ increase or tariff reduction for supply-managed sectors (dairy, poultry, eggs) in trade negotiations. On the allocation complaint, the U.S. record under USMCA dispute settlement is mixed: a 2022 panel largely sided with Washington on Canada’s processor-reserved pools, but a second panel in November 2023 upheld Canada’s revised allocation measures — closing off the litigation route and, arguably, setting the stage for this month’s blunter Section 338 approach. U.S./Canada dairy trade matters: Canada is the U.S. dairy industry’s No. 2 export market, a point Doud himself stressed.

USMCA at six: ‘still the gold standard’

Flory asked for the general outlook on the USMCA evaluation now underway — will farmers end up in a beneficial place? Doud pushed back on the premise that the agreement isn’t already delivering: “It is [beneficial] for U.S. farmers. Our trading relationship in ag between the U.S. and Mexico is tremendous. The deal we did with USMCA is still the gold-standard agreement that we use with just about every other country in the world today.” He added that he travels to Mexico next week to follow up with the dairy industry there.

“Most of the issues with Mexico in USMCA are not agricultural,” Doud said. “You’ve got China in Mexico all over the place, flouting the tariffs we have on China by coming through Mexico. That’s got to be dealt with, and I think the Mexicans agree with that. That’s an issue that has emerged since we did this deal.” Rules of origin for automobiles, he added, remain “always a sensitive issue, top of mind” for the administration. On dairy specifically: “Mexico is our number-one market. Canada is our second-best market. It isn’t that we have a terrible trading relationship — we’ve just got a few flies in the ointment we’ve got to get sorted.”

Background. The USMCA Free Trade Commission held the agreement’s first mandated six-year joint review on July 1, 2026. Mexico and Canada endorsed a 16-year extension; USTR Jamieson Greer said the U.S. “did not agree to renew the USMCA in its current form.” The agreement remains fully in force through July 1, 2036, but the U.S. decision triggers annual joint reviews every year until then — recurring pressure points at which Washington can extract changes on dairy, autos rules of origin and Chinese transshipment. U.S./Mexico negotiating rounds are already underway, with a third round held in Mexico City this week.

China and the new Board of Trade

Shifting to China, Flory asked about “the council that’s overseeing trade with China — is it a good thing? Is it working? Is it practical?” Doud described the new U.S./China Board of Trade as “an enhanced level of engagement and conversation and discussion between us and China,” whose goal is to “check in on how our trading is doing” on a regular basis and ask “are there areas where we need to increase the tariffs or decrease the tariffs?”

“The trading relationship in ag between the U.S. and China today is transactional,” Doud said. “The discussion was, we want China to import 25 million tons of soybeans from the U.S. The Chinese understand that transactional kind of relationship. And I think they will do that.” Then a bit of news-making color: “President Xi is coming here, what, the 24th of September, to Washington, D.C.? I will tell you, he will come bearing gifts. There will be some stuff going on in agricultural trade between the U.S. and China. I think it’s good.”

Doud didn’t spare the previous administration. “I don’t want this to sound too political, Chip, but it’s just honesty: what we had for four years in the Biden administration was not one single conversation in ag trade between the U.S. and China. Not one,” he said. “If you’re buying fertilizer from somebody, and you buy it, and then for four years he doesn’t return your phone calls — are you going to stay with him? You’re going somewhere else. So the situation we’re in with China in ag trade is on us. We’ve kind of blown it here. And this Board of Trade effort is an effort to really engage with China, get the wheels back on the wagon and get this relationship back on track.”

Background. The U.S./China Board of Trade emerged from President Trump’s May 2026 state visit to Beijing, which reaffirmed China’s earlier commitment — first struck in October 2025 — to buy at least 25 million metric tons of U.S. soybeans annually through 2028, alongside pledges on beef and poultry facility re-registrations, biotech approvals and Boeing aircraft. Beijing has never publicly confirmed the purchase figures. Through late May, China had taken roughly 8.3 MMT of U.S. soybeans under the earlier tranche of commitments, after freezing purchases through much of 2025 in favor of South American origin. President Trump confirmed on July 23 that Xi will visit the U.S. on Sept. 24 — the first state visit by a Chinese leader since 2015. China has reportedly agreed to purchase $17 billion worth of unspecified U.S. commodities in 2026 (prorated), 2027 and 2028. 

Brazil and the new 25% tariff

On the 25% Section 301 tariffs on Brazil that took effect the day before the interview, Flory asked simply: “What’s the goal here?” Doud was candid that agriculture isn’t the target: “I’m not sure there’s much ag-related in that. I haven’t really seen the details.” Flory noted that beef was exempted — “I know there’s a lot of cattlemen out there wondering why” — along with coffee and orange juice. “Those are products that go straight to the grocery store,” came the reply.

Doud, a former chief economist of the National Cattlemen’s Beef Association, reminded listeners that Brazilian beef already faces a longstanding barrier: “Keep in mind, on beef, for 30-some years — this is WTO — we have a tariff-rate quota. Once you hit a certain quantity, the tariff on Brazilian beef coming into the U.S. is 26.4%. That’s been in place since 1994, I think. And Brazil every year hits that in just a couple of weeks — less than a month.”

Background. USTR announced the Section 301 action against Brazil on July 15, with the 25% duty effective July 22 — the first major country-specific 301 measure since the Supreme Court struck down the IEEPA tariffs in February. The investigation covered Brazil’s digital-trade rules, electronic payments, IP enforcement and ethanol market access. The final action broadened exemptions to include beef, coffee, orange juice, civil aircraft, energy products and pharmaceutical inputs — largely consumer-facing and inflation-sensitive goods. Cattle groups such as R-CALF USA publicly criticized the beef exemption, arguing imports undercut U.S. ranchers at a time of herd rebuilding; exempting it, however, blunts grocery-price impacts with retail beef at record highs.

War stories with Lighthizer in Iowa

Flory closed by asking about Doud’s recent appearance in Iowa alongside his former boss, Robert Lighthizer. “We were telling some old war stories,” Doud laughed. “Bob is still very adamant and engaged in all this, although he’s not in an official capacity.” He shared a favorite line from the trip: Lighthizer worked for Sen. Bob Dole (R-Kan.) back in the day, and because Dole won the Iowa Republican caucuses twice, “Bob referred to him as the president of Iowa.”

More substantively, Doud pointed listeners to the closing argument of Lighthizer’s book: “Every country in the world tries to game the United States in terms of our monetary policy and fiscal policy and trade policy and regulatory policy… He said, I don’t know what the right combination of all those things is to level the playing field — what we need is just a little bit of tariff.” Doud added that on the tax side, “the best thing we’ve done is the big, beautiful bill.”

Perspective and analysis

Doud is a uniquely well-placed interpreter of this moment — and an interested party. The Section 338 action’s dairy component is a policy his organization has pursued for years, so his “it’s all leverage” framing should be read both as insider analysis and as advocacy. That said, his account of the Canada strategy is coherent and, in one respect, shrewder than the headlines suggest: the U.S. ask he articulates — administer the TRQs as negotiated, rather than expand them — is deliberately crafted to give Ottawa an exit ramp. Canada’s C-202 law prohibits its negotiators from increasing quota volumes, but it does not obviously prohibit changing who gets the allocations. By framing the demand as implementation rather than expansion, Washington (and NMPF) are aiming at the one concession Canada could legally make. That is also the ground on which the U.S. lost the second USMCA dispute panel in 2023 — which explains why the administration has now reached for a unilateral tool rather than another round of litigation.

The risks are real, though Doud didn’t dwell on them. A 50% duty on Canadian dairy, alcohol and autos effective Aug. 19 invites retaliation and lands just as the annual USMCA review cycle begins — the very forum where the U.S. hopes to bank permanent gains. Section 338 is also legally untested in the modern era; after the February IEEPA ruling, importers will almost certainly test it in court. And Doud’s own historical analogy cuts both ways: in 2018, Canada ultimately joined a done U.S./Mexico deal, but only after securing supply management’s core. The politics in Ottawa have since hardened into statute, and any Canadian government that visibly capitulates on dairy risks its standing in Quebec. “Past Greer, up to the top” is right — this likely ends, if it ends, in a leaders-level bargain.

On China, the skepticism Doud applies to Canada deserves to be applied symmetrically. The 25 MMT annual soybean commitment echoes Phase One, which Doud himself negotiated — and China ultimately fell roughly 40% short of Phase One’s ag targets when politics and a pandemic intervened. The pace so far (about 8.3 MMT under the initial tranche, with U.S. beans priced 50-60 cents over South American offers) argues for watching shipments, not announcements. His “not one conversation in four years” charge against the Biden administration is effective radio, but it compresses a more complicated record: formal engagement atrophied and Phase One enforcement lapsed, yet the deeper story is structural — China has been deliberately diversifying toward Brazil since 2018, a shift no meeting cadence would have fully reversed. The Board of Trade is nonetheless a genuine upgrade: a standing venue that treats ag purchases as adjustable policy rather than an afterthought. If Xi does “come bearing gifts” on Sept. 24, expect them to be tactical — front-loaded purchases, facility registrations, perhaps biotech approvals — rather than structural market opening.

The through-line of the whole interview is the Lighthizer worldview Doud carried from USTR to NMPF: tariffs are not an end state but an instrument, and the U.S. under-uses its leverage at its peril. Farmers listening will hear two different timelines in that theory. On Canada dairy, leverage could pay quickly if Ottawa reallocates quotas. On China, the same theory asks row crop agriculture to accept a transactional, purchase-commitment relationship — one that history suggests delivers less than promised, and that leaves U.S. soybeans one diplomatic rupture away from another lost season. Doud’s optimism is conditional, and he said the quiet part himself: this is a relationship where “we’ve kind of blown it” before.

Bottom line

Doud’s message: the Section 338 tariffs are negotiating leverage aimed at making Canada honor its USMCA dairy-quota commitments — a fight he expects to be settled at the Trump level, not below. Watch three dates: Aug. 19 (Canada tariffs take effect), Sept. 24 (Xi in Washington, likely with ag ‘gifts’), and the rolling annual USMCA reviews, where dairy TRQ administration, auto rules of origin and Chinese transshipment through Mexico will dominate the U.S. agenda.