As the United States and Canada move toward a renegotiation of the Canada-United States-Mexico Agreement (CUSMA), American officials are signaling their intent to make this a final reckoning for Canada's supply management system. A new White House report on foreign trade barriers once again highlights Canadian border controls on foreign dairy. A bipartisan coalition of U.S. lawmakers, including some vocal opponents of President Donald Trump's trade wars, is urging the White House to take a hard line on Canadian milk policy.
U.S. Trade Representative Signals Tough Stance
In Congressional testimony last week, U.S. Trade Representative Jamieson Greer suggested that issues such as dairy could be addressed either through negotiations or via enforcement actions. "We have raised it repeatedly and frequently over the past year," Greer said in response to a question about Canadian border controls on dairy. "They have made no commitments on this front." These comments echoed Greer's previous remarks before the same committee in December, where he listed "market access for U.S. dairy products" as the top grievance with Ottawa.
How Supply Management Works
In place since the 1970s, Canada's supply management system functions as a state-managed cartel for dairy, poultry, and eggs. Provincial marketing boards set fixed prices by establishing production quotas for Canadian dairy farms. Any production beyond those quotas must be destroyed by law. For the 2024/25 fiscal year, Canadian dairy producers were allowed to produce only enough milk equivalent to 422.82 million kilograms of butterfat.
Strict import controls are central to the system. Foreign milk and cheese can enter Canada only under quotas held by permitted importers, and anything beyond those quotas faces some of the highest tariffs imposed by the Canadian government. For example, cheese curds are tariffed at 245.5 percent, concentrated milk at 259 percent, and some dairy-derived butters at 313.5 percent.
Bipartisan Pressure from U.S. Lawmakers
Since Trump's inauguration in early 2025, Canadian relations with the U.S. have been dominated by punitive tariffs on Canadian imports. However, Trump's tariffs have been broadly unpopular among the U.S. electorate, particularly within the Democratic Party. An Angus Reid Institute poll from last month found that 51 percent of U.S. respondents believe their government should impose "no tariff" on Canadian trade. In the prior month, the U.S. House of Representatives voted 219-211 to pass a Democrat-championed resolution calling for a partial end to the trade war with Canada.
Yet supply management is a different story. For decades, both Democrats and Republicans have bristled at Canadian dairy protectionism. A letter sent to Greer by 74 members of Congress stated, "Canada has a long history of unfairly restricting imports of U.S. dairy products while simultaneously offloading artificially low-price nonfat milk solids onto the global market."
Previous Trade Negotiations
When Canada and the U.S. struck a renegotiated free trade agreement in 2020, the U.S. insisted on expanding Canada's tariff rate quotas (TRQs), which allow a certain amount of U.S.-made dairy to enter Canada tariff-free. Despite this, American officials remain unsatisfied, viewing the current system as a persistent barrier to fair trade.
