Article – The recent sigh of relief across Canadian industry after escaping President-elect Donald Trump’s threatened 25% blanket tariffs could be short-lived, particularly for the country’s protected dairy sector. Sources close to the transition team suggest supply management—especially for dairy—sits high on Trump’s trade grievance list as he prepares to return to the White House.
“Trump has always viewed Canadian dairy as unfinished business,” explains Marjorie Levinson, trade policy specialist at the University of Toronto. “During USMCA negotiations, he secured small concessions, but his administration wanted much deeper access to Canada’s dairy market than they ultimately achieved.”
The Canadian dairy industry operates under supply management—a system protecting roughly 10,000 family farms through production quotas, import controls, and price stabilization. The system ensures farmers receive consistent returns while consumers pay higher prices than their American counterparts.
During my recent visits to dairy operations in Wisconsin and Quebec, the contrast was striking. Wisconsin producers continue struggling with price volatility that has forced nearly 40% of small dairy farms out of business since 2016. Meanwhile, Canadian counterparts enjoy stability but pay dearly for quota—often millions per farm—effectively creating a high-cost, high-barrier industry structure.
Trump’s first term saw partial breakthroughs, with Canada granting American producers approximately 3.6% market access under the USMCA, but this fell far short of U.S. industry expectations. U.S. exports to Canada reached $478 million last year, yet American producers believe this represents merely a fraction of potential market opportunity.
“We’re still looking at a heavily protected system that disadvantages American dairy farmers,” said Jim Mulhern, president of the National Milk Producers Federation, in a recent statement. “The fundamental structural barriers remain in place.”
Canadian officials are reportedly preparing defensive strategies, recognizing that Trump’s trade team—potentially including former USTR Robert Lighthizer—may return with greater leverage and determination. Unlike steel and aluminum tariffs, which affected multiple allied countries, a focused effort against Canadian dairy could prove harder to counter through retaliatory measures.
The political calculus is complex. Canada’s dairy sector wields outsized political influence, particularly in Quebec and Ontario where approximately 7,500 dairy farms operate. Prime Minister Justin Trudeau’s government has consistently pledged to protect supply management, but faces a significantly weakened negotiating position amid broader economic challenges.
“The Trudeau government would face enormous political consequences from any substantial weakening of supply management,” notes Sylvain Charlebois, director of the Agri-Food Analytics Lab at Dalhousie University. “But the reality is Canada has fewer cards to play this time around.”
During my conversations with dairy farmers in eastern Ontario last month, I found a mixture of defiance and anxiety. “We’ve built our entire operations around this system,” said Michel Desrochers, a third-generation dairy farmer. “American demands essentially ask us to commit economic suicide while they heavily subsidize their own producers.”
The coming confrontation reflects fundamentally different agricultural philosophies. The U.S. dairy industry, despite receiving approximately $2.2 billion in government support annually according to OECD data, operates in a largely open market environment with dramatic price swings. Canada’s supply management creates stability but at the cost of innovation and scale.
Beyond dairy, Canadian officials worry about potential Trump demands regarding poultry and egg sectors—also protected under supply management—and telecommunications, where foreign ownership restrictions remain in place.
International trade experts suggest Canada might need to prepare creative compromises, potentially offering greater market access while preserving core supply management structures. “We’re potentially looking at a sector-by-sector negotiation rather than a wholesale USMCA renegotiation,” suggests former Canadian trade negotiator Clifford Sosnow.
Meanwhile, consumers remain caught in the middle. Canadians pay roughly 50% more for dairy products than Americans, according to Statistics Canada, though Canadian producers argue their products face stricter quality and hormone-use regulations.
The coming dairy confrontation may prove emblematic of Trump’s broader trade approach—targeted pressure on specific sectors rather than comprehensive agreements. For Canada, navigating these tensions will require delicate balancing between protecting a culturally significant agricultural system and maintaining crucial access to American markets that account for nearly 75% of Canadian exports.
As one Quebec dairy farmer told me, watching the U.S. election results with growing concern: “We survived the first Trump presidency with a few scratches. I’m not sure we’ll be so lucky the second time around.”
