Canada has passed a bill doubling dairy tariffs and banning future trade concessions on dairy, escalating tensions with the U.S. as USMCA renewal approaches.
The Canadian Senate has approved legislation that blocks any future trade deals from compromising Canada’s dairy tariff protections. The law effectively doubles down on the country’s longstanding supply management system and removes dairy tariff-rate quotas (TRQs) from negotiation in international trade agreements.
The move is viewed as a strategic positioning ahead of potential renewal talks over the United States-Mexico-Canada Agreement (USMCA), especially given the expected return of former U.S. President Donald Trump to the trade conversation. Trump has consistently criticized Canada’s dairy tariffs, which can be as high as 298% on products like butter.
Under the supply management system introduced in the 1970s, Canada maintains strict provincial quotas, enforces minimum prices, and imposes high import tariffs to protect domestic dairy farmers — particularly those in key political provinces like Quebec and Ontario.
While Canadian politicians have historically avoided reforms to the system, critics argue that this latest legislative step could strain international relations. The Canadian Agri-Food Trade Alliance (CAFTA), which represents exporters and agri-food businesses, called the bill “a flawed piece of legislation” that undermines Canada’s commitment to open, rules-based trade.
Likewise, the Canadian Cattle Association referred to the measure as “bad trade policy,” warning that it may provoke retaliation or disputes from other nations. The United States, along with New Zealand, has previously filed complaints against Canada’s dairy quotas at the World Trade Organization (WTO) and under trade pacts like the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
The U.S. has long argued that Canada’s TRQs favor domestic processors over importers, restricting access to high-value U.S. dairy exports. A 2021 USMCA dispute settlement panel sided with the U.S. on this matter, although Canada was later found to be in compliance in a follow-up case.
Despite international pressure and the potential for future trade challenges, the Canadian government has remained firm in its stance. The bill signals an unwillingness to yield on supply management, even as the country navigates uncertain trade dynamics with key partners.
As trade talks intensify, particularly with a renewed U.S. administration focused on tariffs, this bill is poised to be a central issue in North American negotiations.