For years, the United States has accused Canada of protecting its dairy market too aggressively. Yet when you look at actual trade flows and the use of CUSMA tariff-rate quotas, a much more nuanced picture emerges. Americans already sell far more dairy products to Canada than we sell to them, and in some categories they use almost all of the access they have been granted. On our side, several U.S. quotas available to Canadian products remain nearly empty.
The debate deserves better than the image of a Canadian dairy market hermetically sealed against American products. The market is organized, quota-based and protected, yes. But closed? The numbers tell a different story.
Nearly two and a half times more U.S. dairy products coming into Canada
Start with the trade balance. According to 2024 data from the Canadian Dairy Information Centre cited by Dairy Farmers of Canada, the United States sold nearly C$880 million worth of dairy products to Canada, compared with about C$358 million in the other direction.
In other words, the United States sells Canada nearly 2.5 times more dairy products than Canada sells to the United States.
That figure does not prove that every Canadian rule is ideal. It does demonstrate something much simpler: the Canadian market is already an important outlet for the U.S. dairy industry.
CUSMA nevertheless provides a degree of reciprocity
CUSMA created new tariff-rate quotas for dairy products. A tariff-rate quota allows a specified quantity of a product to enter at a low or zero tariff. Once that quantity is exceeded, the product can generally still be imported, but at a much higher tariff.
On paper, several dairy concessions are relatively reciprocal. Canada opened new volumes to U.S. products, and the United States opened volumes to Canadian products. Cheese is especially revealing because both sides had total access of roughly 12.5 million kilograms in 2025, even though the tariff-category structure is not perfectly identical.
The question is therefore not only how many tonnes are authorized. It is how much of that access is actually used.
Cheese: 86% on one side, 2.33% on the other
In 2025, Canada granted U.S. products two cheese quotas under CUSMA: 6.25 million kg for cheese of all types and 6.25 million kg for industrial cheese.
U.S. imports used 97.85% of the first quota and 74.66% of the second. Combined, that represents about 10.78 million kg out of 12.5 million, for an overall utilization rate of roughly 86.25%.
Now look in the other direction.
The historical fill document published by U.S. Customs and Border Protection shows that in 2025 Canada also had access to a U.S. cheese quota of 12.5 million kg. Canadian imports into the United States under that quota reached only 290,702 kg.
Utilization rate: 2.33%.
Put another way, for every kilogram of Canadian cheese that entered the United States under this quota, roughly 42 kilograms of available access went unused.
That is probably the most important number in the entire file. For cheese, our immediate problem is clearly not that the U.S. quota is too small. We are nowhere close to using it.
The same pattern appears elsewhere
Cheese is not an isolated case. The 2025 data show other major gaps.
- Butter, cream and cream powder: U.S. products used about 94.47% of their Canadian quota of 4.5 million kg. Canadian products used only 25.55% of the corresponding U.S. quota.
- Skim milk powder: U.S. imports used about 11.86% of their Canadian quota of 7.5 million kg. Canada used only 0.74% of its U.S. quota of the same size.
- Whole milk powder: Canada used only 0.13% of its U.S. quota in 2025.
- Concentrated milk: Canada used none of its 1.38 million litres of U.S. access in 2025.
It would still be wrong to draw an overly simple conclusion. Americans do not fill every quota they have in Canada. Their 50-million-kg milk quota, for example, was only about 17.3% utilized in 2025. The picture varies sharply by product.
But one thing is clear: in several categories where Canada exports very little to the United States, the size of the quota is not the immediate constraint.
Why do we export so little?
This is where the issue becomes more interesting than a simple political fight over tariffs.
Canadian supply management is designed first and foremost to supply the domestic market. Production is adjusted to Canadian demand. The United States, by contrast, has a much larger dairy industry, very large processing capacity and export infrastructure developed over many years.
For an American buyer, the question is straightforward. Why import cheese, powder or a dairy ingredient from Canada if an equivalent product is available from a huge pool of U.S. suppliers without crossing a border?
For a Canadian supplier to be attractive, it generally needs an additional advantage: a better price, a distinctive product, a sought-after brand, a particular quality attribute or a capability the U.S. market does not easily provide.
This is an economic interpretation of the data, not proof of a single cause. But it fits the observed utilization rates much better than the idea that Canada is simply prevented from exporting because its quotas are too small.
The United States also imposes regulatory friction
Exporting a Canadian dairy product to the United States is not as simple as selling the same product inside Canada.
For several dairy products covered by tariff-rate quotas, the U.S. importer must obtain an annual licence from the U.S. Department of Agriculture to qualify for the reduced tariff. Imported food must also meet Food and Drug Administration requirements. Relevant foreign facilities must be registered and shipments are subject to prior notice. Depending on the product and the importer, U.S. foreign-supplier verification rules may also apply.
These steps create real friction. In a U.S. market with enormous domestic supply, they can be enough to make a Canadian supplier less attractive when it does not offer a clear commercial advantage.
But it would be an exaggeration to present these rules as proof that Washington is artificially blocking Canadian dairy products.
Because Canada also imposes rules on importers
U.S. products entering Canada are also subject to regulatory obligations. Importers must comply with the Safe Food for Canadians Regulations, Canadian Food Inspection Agency requirements, Canadian composition and labelling standards and, for quota-controlled products, the permit system administered by Global Affairs Canada.
Friction therefore exists in both directions. The systems are not perfectly identical, but the available data do not support the claim that low Canadian exports are simply the result of an artificially closed U.S. border.
The imbalance appears to reflect more fundamental differences between the two industries: a Canadian industry organized mainly around its domestic market and a massive U.S. industry able to serve its home market while aggressively pursuing export opportunities.
A much less symmetrical Canadian concession
There is, however, one element of CUSMA that is much harder to describe as reciprocal.
Under the agreement, Canada accepted thresholds on its global exports of skim milk powder, milk protein concentrates and certain infant formula products.
For 2026-2027, the duty-free threshold is 37,596,820 kg for skim milk powder and milk protein concentrates, and 42,967,795 kg for infant formula. Above those thresholds, Canada must impose an export charge of C$0.54 per kg on the first category and C$4.25 per kg on the covered infant formula products.
Most importantly, these restrictions do not apply only to sales to the United States or Mexico. They apply to Canadian exports to the entire world.
That is an important concession to keep in mind when CUSMA is presented as a simple reciprocal exchange of dairy market access.
Canada has already been challenged, and the story is more nuanced than it is often portrayed
The United States has challenged the way Canada allocates dairy tariff-rate quotas for several years.
In 2022, an initial CUSMA panel sided with the United States on an important point: Canada had reserved too large a share of certain quotas for processors. Ottawa then changed its system.
Washington challenged the revised approach as well, including Canada’s market-share allocation method and the exclusion of retailers, restaurants and some other importers from direct allocations.
This time, in 2023, two of the three panel members concluded that Canada’s revised measures did not violate the CUSMA provisions cited by the United States. The third member dissented.
The current dispute is therefore not simply about how much U.S. cheese Canada agrees to let in. It is also about who in Canada can directly obtain the right to use that access.
A protected market is not a closed market
It is perfectly legitimate to criticize supply management. Tariff-rate quotas, quota values, competition, allocation methods and consumer costs are all fair subjects for debate.
But words matter.
A market in which the United States sells nearly C$880 million worth of dairy products a year, has new access negotiated under CUSMA and uses more than 86% of its cheese access is not a closed market.
It is a protected and organized market.
And when both sides of the border are compared, the paradox becomes difficult to ignore: the United States is asking for even more access to Canada’s dairy market even though it already runs a large dairy trade surplus with us. Meanwhile, Canada leaves most of several U.S. quotas available to Canadian exporters unused.
So perhaps the real question is not only: why does Canada protect its market?
It could also be: why does our industry use so little of the access it already has to the U.S. market?
More on supply management
- Sylvain Charlebois’s 10 Myths About Supply Management: What He Gets Right, What He Oversimplifies, and What He Leaves Out
- Supply management: is Canada’s agricultural shield beginning to crack?
Sources
- Global Affairs Canada, 2025 Annual Report on the Administration of the Export and Import Permits Act
- U.S. Customs and Border Protection, USMCA Agriculture Historical Fill Document
- Dairy Farmers of Canada, Canada-U.S. dairy trade balance
- USTR, 2023 CUSMA panel decision on Canadian dairy TRQs
- USTR, 2022 CUSMA dairy TRQ decision
- USDA Foreign Agricultural Service, Dairy Import Licensing Program
- Food and Drug Administration, importing food into the United States
- Canadian Food Inspection Agency, dairy import requirements
- Global Affairs Canada, CUSMA dairy export thresholds
- Global Affairs Canada, 2026-2027 under-threshold quantities
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