Canada’s dairy industry policy is among the most politically sacrosanct in the country. He has also long been a thorn in Donald Trump’s side.

Now, Canada’s dairy supply management system is back in the spotlight after the U.S. president singled it out as one of three major irritants used to justify a 50% tariff on $20 billion worth of Canadian products imported into the U.S., set to take effect in August.

Trump maintains that the system, which includes production quotas, pricing and import quotas for dairy, eggs and poultry, is not “reasonable” for American farmers who want to sell their products north of the border.

Canadian politicians will now have to decide whether to stick with their popular supply management system or risk the wrath of the public and a politically “powerful” dairy industry by trying to fix this problem with Trump.

So far, they have indicated that dairy is not a starter factor.

Quebec Premier Christine Fréchette, whose province is home to Canada’s largest dairy industry, said Tuesday that supply management was non-negotiable.

And last week, US-Canada Trade Minister Dominic LeBlanc told the BBC that the system “is a cornerstone of Canada’s economy and our rural communities” that “ensures Canadians have access to high-quality dairy products made by Canadian dairy farmers.”

They maintain that it supports Canadian farmers and ensures stable prices and supply of basic foods.

Dairy farmers are also known to have staged protests (with tractors and cattle on Parliament Hill) over possible concessions in trade negotiations.

“It is the most powerful political lobby in the country and extends to all major political parties,” said David Clement, Canadian policy director for the international advocacy group Consumer Choice Center.

Canada’s supply management system has been in place since the early 1970s and has endured even though other Commonwealth nations, such as Australia and New Zealand, phased out similar policies.

Farmers have production quotas that limit the amount of dairy they can produce. Prices are then set by marketing boards in each province, providing farmers with a predictable income and, at the same time, a constant domestic supply.

A small amount of foreign dairy products can enter Canada duty-free or at low tariff rates within established quota limits. Those who exceed the limit, however, face a tax of 200% to almost 300%, making selling in Canada prohibitively expensive for both foreign producers and consumers.

Currently, U.S. producers have tariff-free access to just 3.5% of Canada’s market, even as the country is among the top importers of U.S. dairy products, purchasing $1.3 billion worth of products in 2025, according to data from the U.S. Department of Agriculture (USDA).