Four months after the federal election, Prime Minister Mark Carney has yet to deliver on his pledge to secure a new trade deal with the mercurial Trump administration.
So far, the Carney government has disclosed little about the points of dispute in the trade talks.
But economist Sylvain Charlebois says one source of tension is obvious: supply management, the quota, pricing and tariff system that protects Canada’s dairy, poultry and egg producers.
“[Supply management is] not the only reason we’re locking horns with the U.S., but it’s the one that never really goes away,” said Charlebois, a professor at Dalhousie University and one of Canada’s leading authorities on food economics.
“Every time we sit down to talk trade, the Americans bring it up, and Canada digs in. … It’s basically the ‘family argument’ that resurfaces at every dinner.”
So far, Ottawa has publicly dug in on supply management in this round of talks, too — even while it says it is working to secure the best possible deal for Canadians.
For Charlebois, it is not possible to do both. “[T]here’s a trade-off,” he said. “That’s the price of political protectionism.”
Political fortress
On July 31, the Trump administration announced it would raise tariffs on Canadian goods not covered under CUSMA, the Canada-U.S.-Mexico free trade agreement, to 35 per cent. That is an increase from 25 per cent previously.
The Carney government, which has been sending high-level cabinet ministers to the U.S. for months, has said little about the key sticking points in the negotiations.
Canadian Affairs sought comment from Canada’s ministers of foreign affairs, industry, Canada-U.S. trade and international trade. Questions included whether supply management has been a central issue in the talks and whether Canada has communicated supply management is off the table in negotiations.
Only Global Affairs Canada provided a response, saying in a written statement that, “The Government of Canada remains committed to maintaining, protecting and defending supply management.
“Canada’s supply management system provides stable, fair and predictable prices for famers [sic] and ensures a stable supply of high-quality products for Canadians.”
At a March 28 campaign event, Carney told reporters that supply management was not open for negotiation as part of Canada-U.S. trade talks. “We will never have discussions with respect to supply management,” he said. “It’s off the table.”
And after being re-elected in April, one of the Carney government’s first legislative acts was to pass Bill C-202, a law that prohibits federal negotiators from opening more dairy, poultry or egg quota to trading partners in international trade agreements.
“[Bill C-202] tells farmers, ‘We’ve got your back,’ but it also ties Canada’s own hands a bit,” said Charlebois.
“In reality, Ottawa was already extremely reluctant to give ground on dairy, eggs, and poultry, so this just puts that reluctance into law.”
Dairy Farmers of Canada, the sector’s national lobbying organization, lobbied 26 government institutions between April 2024 and April 2025. Federal lobbying laws do not require lobbyists to disclose how much they spend on lobbying, but a 2018 estimate by the Canada West Foundation puts the annual dairy lobby spend at $100 million.
For its part, the U.S. has officially framed the decision to increase tariffs on Canada in national security terms. In a July 31 fact sheet, the Trump administration said the president was acting under emergency powers “to address the flow of illicit drugs across our northern border.”
But President Donald Trump has been vocal about Canada’s supply management system being an issue.
“ Canada’s a very tough country to deal with … they took advantage,” Trump said in a June 29 interview with FOX News, referring to the tariffs Canada charges on American agricultural exports.
A U.S. Embassy spokesperson told Canadian Affairs in an emailed statement that, “Between the United States and Canada, it is not a dispute over free trade in dairy. It is a discussion about fair trade.”
“Dairy is sensitive in our relationship as both countries understand the critical role it plays in our economy and culture.”
Winners and losers
Charlebois says that protecting supply management could come at the cost of securing broader access to U.S. markets for a larger cross-section of Canadian industry.
Supply management protects just five agricultural sectors — dairy, chicken, turkey, table eggs and broiler hatching eggs — which together account for only $30 billion, or one per cent, of annual GDP.
“By protecting a small group of producers, we lose leverage in other negotiations — think lower tariffs on other goods or better market access abroad,” Charlebois said.
Relaxing supply management could also offer consumers some relief.
By setting a minimum price for milk, Canada’s dairy supply management system alone costs the average consumer an additional $500 a year. This cost pushes about 190,000 Canadians into poverty, according to a 2023 report by McGill University’s Max Bell School of Public Policy.
“If you dismantled or loosened [supply management], consumers might see lower prices in some categories, especially dairy,” said Charlebois. “But farmers would face a lot more volatility, and you’d get winners and losers depending on how competitive they are.
“The supply chain would have to adjust — processing, distribution, even grocery pricing models would change.”
Charlebois says a reformed system of supply management that is more responsive to consumer demands would make the system more flexible. It would involve “letting in more imports under quota, aligning prices more closely with market realities, and introducing innovation incentives.”
Given the depth of the entrenched interests, however, Charlebois warns that any such reform would be a “huge lift” politically.
“It’s not just an economic question; it’s an emotional one, too.”
How much does the dairy supply management protect megaproducers like Saputo?
A recent editorial in the Globe and Mail argued that the US dairy industry benefits from government subsidies and protectionism. If this is true, I think it ought to be mentioned in an article such as this.
We have used American dairy products when we’ve been down visiting and travelling in the United States and we’re very happy to get back to our pure Canadian products.
When Americans complain about something that Canadians are doing, you have to become very suspicious about their motives, I support and personally know dairy producers.
Let’s remove the dairy products argument off the table no arguments. Period ‼️