As part of the Trump administration’s trade talks with Canada, Trump has once again unfairly attacked Canada’s supply management system in the dairy industry. The problem is that this continuous American attack doesn’t really make much sense! Here’s why.
First and foremost, Canada, with a population of about 40 million, is a small market to begin with. Secondly, while the American dairy and poultry markets are dominated by large industrial farms, the Canadian scene is primarily one of smaller farms, often family managed. Thirdly, U.S. dairy producers reportedly insist they’re not looking for Canada to dismantle its crucial supply management system. Fourthly, Canada’s imports of U.S. dairy products have risen significantly since the quotas imposed under the current Canada-U.S.-Mexico Agreement (CUSMA) took effect in 2020. Those imports totalled $897 million in 2024, according to Statistics Canada data, more than four times the value of imports in any year before 2020. In 2024, American dairy exports to Canada had increased by 67% since 2021. This made Canada America’s second-largest dairy customer and its largest customer per capita. Moreover, Canada presently has a $520 million dairy trade deficit with the U.S. Fifthly, Trump’s claims of a 390 or 400 per cent tariff are false, particularly given the way the quotas on American dairy products actually work under the CUSMA. Indeed, it is reported that to date, no U.S. dairy products imported by Canada have been subjected to those higher tariffs under the current agreement. Under CUSMA, the U.S. can send 49 million litres of milk to Canada every year, before a single drop would have a tariff imposed. In addition, that tariff-free amount is set to continue to grow gradually over the next 13 years. The U.S. uses the same system of tariff-free imports of certain Canadian products up to a set quantity before imposing its tariffs. Finally, Canada’s maximum allowable dairy exports to the U.S. are lower than those for other countries, including the United Kingdom and Australia, according to the U.S. International Trade Commission’s harmonized tariff schedule. So, let’s not talk about unfairness when it comes to dairy exports between the two countries.
Furthermore, the president of the Dairy Farmers of Canada, David Wiens, notes that countries such as the United States heavily subsidize their dairy industry for production, forcing taxpayers to pay twice for their milk (once at the store and again through their taxes). In contrast, Canadian dairy farmers do not receive similar production subsidies.
Importantly, supply management has delivered food security and sovereignty to Canada for more than six decades by producing dairy here for Canadians. It aligns production with demand to deliver high-quality, diverse products at stable prices for Canadian consumers and a fair return for its farmers. It also strengthens the economy, with about 340,000 Canadian jobs fuelled by the supply-managed dairy, poultry and egg sectors, and over $30 billion contributed to Canada’s gross domestic product. Simply put, Canada’s rationale for the approach taken under CUSMA is to ensure that the domestic dairy industry thrives by effectively capping how much the U.S. can export each year, preventing cheaper American products from dominating the smaller market.
There are also benefits to having few industrial farms as demonstrated by the recent and ongoing costly toll of the bird flu outbreak on U.S. dairy farms, which in particular drove up the price of eggs in the states, affected dairy cows, decreased milk production and financially decimated many affected farms. None of this happened to the same extent in Canada.
One chief complaint from the U.S. focuses on Canada’s cheap exports of milk proteins, also described as milk solids, such as skim milk powder. The Americans argue that because Canada’s supply management system keeps domestic prices artificially high, Canada can sell its excess production of milk proteins internationally at artificially low prices, undercutting the competition. Such issues can certainly be reasonably discussed as part of any renegotiation of the CUSMA scheduled to be undertaken in 2026. Remember that Trump actually signed that agreement during his first term as president. The key point is that one has to do away with sources of misinformation and continue to deal with this particular trade issue in a way that both countries can benefit, thereby profiting farmers on both sides of the border.
