FIRST READING: Why the Americans are coming hard for supply management

The U.S. and Canadian flags are pictured at Peace Arch Historical State Park on the US-Canadian border in Blaine, Washington, on March 5, 2025. Photo by JASON REDMOND /AFP via Getty Images

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As the U.S. and Canada lurch towards a renegotiation of the Canada-United States-Mexico Agreement (CUSMA), American officials are signalling that they intend to make this a final reckoning for the Canadian system of supply management.

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A new White House report on “foreign trade barriers” is once again dominated by mentions of Canadian border controls on foreign dairy. A bipartisan coalition of U.S. Congresspeople — including some vocal opponents of U.S. President Donald Trump’s various trade wars — are nevertheless urging the White House to take a hard line on Canadian milk policy.

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And then, in Congressional testimony last week, U.S. Trade Representative Jamieson Greer suggested that issues such as dairy can either be addressed in negotiations, or via “enforcement actions.”

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“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.”

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It echoed Greer’s comments spoken before the same committee in December. In a speech summarizing Washington’s grievances with Ottawa, at the top of Greer’s list was “market access for U.S. dairy products.”

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In place since the 1970s, Canadian supply management effectively functions as a state-managed cartel for the production of dairy, poultry and eggs.

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Provincial marketing boards are empowered to maintain fixed prices by setting production quotas on Canadian dairy farms, and by law, anything produced beyond those quotas must be destroyed.

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For the 2024/25 fiscal year, for instance, Canadian dairy producers were only allowed to produce enough milk equivalent to 422.82 million kilograms of butterfat.

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Strict import controls are at the core of the supply management system. Foreign milk and cheese can only enter the country under quotas held by permitted importers, and anything beyond that is subject to some of the highest tariffs imposed by the Government of Canada.

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Cheese curds, for instance, are tariffed at 245.5 per cent, concentrated milk at 259 per cent and some dairy-derived butters at 313.5 per cent.

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Ever since the inauguration of Trump in early 2025, Canadian relations with the U.S. have been dominated by a series of punitive tariffs levied against Canadian imports by the White House.

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Nevertheless, Trump’s tariffs against Canada have been broadly unpopular among the U.S. electorate, and among the Democratic Party in particular.

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An Angus Reid Institute poll from last month found that 51 per cent of U.S. respondents believe their government should have “no tariff” on Canadian trade. The month prior, 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.

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But it’s a different story when it comes to supply management. For decades, both Democrats and Republicans alike have bristled at Canadian dairy protectionism.

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“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,” reads a letter sent to Greer by 74 members of Congress.

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When Canada and the U.S. first struck a renegotiated free trade agreement in 2020, the U.S. insisted on an expansion of Canada’s “tariff rate quotas” (TRQs). That is, the amount of U.S.-made dairy that would be allowed tariff-free access to Canada.