• Larry Kudlow, President Donald Trump’s top economic adviser, told Fox Business that one issue is holding up a US-Canada trade deal: milk.
• Canada’s high dairy tariffs have been a target for Trump in the North American Free Trade Agreement, or NAFTA, renegotiations.
• NAFTA negotiations between the US and Canada remain ongoing.

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Larry Kudlow, President Donald Trump’s top economic adviser, says one issue is holding up a trade deal between Canada and the US: milk.

“The word that continues to block the deal is: M-I-L-K,” Kudlow said during an appearance on Fox Business. “I’m just saying let go. Milk, dairy, drop the barriers, give our farmers a break, and we can fix some other things.”

Canada’s protection of its dairy industry has been a contentious issue during the renegotiation of the North American Free Trade Agreement, known more commonly as NAFTA.

Canada uses a quota system to limit the amount of foreign dairy coming into the country and applied high tariffs for any products that exceed those quotas. Trump has railed against Canada’s high tariffs as proof the country is taking advantage of the US.

“Canada has made business for our dairy farmers in Wisconsin and other border states very difficult,” Trump tweeted in April. “We will not stand for this. Watch!”

“Canada charges the U.S. a 270% tariff on Dairy Products!” another Trump tweet said in June. “They didn’t tell you that, did they? Not fair to our farmers!”

In NAFTA negotiations, the US made increased access for American dairy farmers a major goal.

Recent reports suggest that Canadian Prime Minister Justin Trudeau may make some concessions on the dairy front, such as opening up access to the Canadian market for US farmers. So far, Trudeau and Minister of Foreign Affairs Chrystia Freeland have stood strong, but the prime minister hinted at wiggle room in a recent radio interview.

“Is there room for flexibility? We’ll see, and that depends on the kind of negotiations we have,” Trudeau said.

Lowering dairy tariffs in a trade agreement wouldn’t be unprecedented for Trudeau, either. Canada agreed to lower tariffs on European cheese as part of the Canada-European Union Comprehensive Economic and Trade Agreement.

While Kudlow harped on the dairy issue, much like his boss, other problems remain outstanding. Canada is attempting to preserve NAFTA Chapter 19, a dispute settlement system that allows the three NAFTA members – Canada, the US, and Mexico – to file complaints against other members for unfair trade practices, like tariffs.

Also, the Canadians want to keep a cultural protection clause that limits the amount of American music, films, and television in the Canadian market. Trudeau argued that such limits are necessary to ensure that Canada preserves its unique culture.

Talks between Freeland and US Trade Representative Robert Lighthizer took place on Wednesday and Thursday, but a final agreement is not expected this week.

Kudlow, for his part, did seem somewhat hopeful.

“I don’t want to predict, I’ll just say Bob Lighthizer is doing a great job and the president is encouraging it,” he said.

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