White House has beef with Canada’s dairy import rules. Does the EU have a better deal?

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In announcing 50-per-cent tariffs on a swath of Canadian imports late Monday, U.S. President Donald Trump cited “discriminatory practices” around the trade in cheese.

The tariffs, set to come into effect on Aug. 19, affect a broad range of exports from hockey sticks to dairy protein to whisky. Mr. Trump invoked a section of a 90-year-old trade act to justify the measures, arguing that Canada’s auto manufacturing, alcohol and dairy trade practices are unfair and harmful to U.S. industry.

Regarding dairy, the White House took aim at Canada’s rules around who is allowed to import dairy into the country, and how those rules differ for U.S. cheese compared to European cheese.

In the tariff order targeting dairy, the Trump administration complained that Canada gives European cheese producers better market access under its Comprehensive Economic and Trade Agreement (CETA) with the EU than it does for U.S. dairy under the United States-Mexico-Canada Agreement, which Mr. Trump negotiated during his first term.

Under the USMCA, Ottawa only allows Canadian dairy processors and distributors access to import licences, not retailers, such as grocery stores. However, under CETA, Canadian retailers can import cheese directly from EU producers.

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The White House order directly references this discrepancy, calling it “discrimination” that puts U.S. dairy producers at a financial disadvantage, and says that the incoming tariffs are necessary to mitigate the harm done by these trade practices.

Changes to how Canada allocates dairy import licences were a high-priority demand of the White House in the lead up to the USMCA review.

Trade experts say these are manageable, and even backed by some Canadian stakeholders, especially in comparison to the other demands made by the White House. But trade lawyers and policy analysts warn that the unusual tactic is likely to be a test case that could undermine Canada’s position in trade negotiations.

“This is not a conversation about dairy supply management,” said Noah Fry, an adjunct professor at Dalhousie University who researches trade and political economy. “It’s not even a conversation so much about dairy import licences. It’s a conversation about leverage.”

Dairy is a supply-managed industry, which means nationwide production is limited and only a small amount of imports can enter the country without paying tariffs that can surpass 200 per cent.

The U.S. dairy industry argues that because Canadian retailers are not permitted to import their products, they are unable to make the most of the total tariff-free quota granted to them in 2018 when Ottawa and Washington negotiated the USMCA.

Canada’s import licence rules “blatantly flout the intent of the deal,” said Shawna Morris, executive vice-president for trade policy and global affairs at the U.S. Dairy Export Council, in a statement to The Globe and Mail, adding that because processors are granted the majority of the licences, they typically import certain types of cheeses used for further processing, compared to higher-end specialty products.

According to data published by Global Affairs Canada, the proportion of the allotted tariff-free imports used, known as the TRQ fill rate, was roughly the same in 2025 under the USMCA and CETA.

In 2025, 6.25 million kilograms of U.S. cheese could enter Canada without paying tariffs. A total of 6.11 million kilograms was imported, according to data from Global Affairs Canada. This means the “fill rate” was 97.9 per cent.

In 2025, 16 million kilograms of EU cheese could be imported into Canada tariff free. A total of 15.6 million kilograms entered the country. The “fill rate” was 97.4 per cent.

However, because the majority of the import licences for U.S. cheese are granted to Canadian processors, less variety of U.S. cheese is imported – and less high-end specialty products hit Canadian shelves.

In 2025, three types of cheese – cheddar, grated or powdered cheese, and mozzarella – accounted for 72 per cent of tariff-free imports from the U.S.

In comparison, Canadian importers shipped a larger variety of cheese from the EU. The top three cheeses – Parmesan, mozzarella and “other types of cheese” – accounted for just 55 per cent of total imports. Specialty, consumer-focused cheeses like Gouda and brie took up a much larger share of the total tariff-free cheese import quota from the EU.

This allocation model doesn’t favour variety and good prices for consumers, said Patrick Pelliccione, chair of the International Cheese Council of Canada and president of food distributor Jan K. Overweel Limited.

While distributors are able to import U.S. cheese, more than 80 per cent of the licences are allocated to large-scale processors, he said. And these processors have operations in the U.S., so can use the licence to move the product between their U.S. and Canadian operations.

“We’re advocating to put the licence or the allocation in the hands of the people who are going to use it to provide Canadians with diversity and choice,” he said, adding that more licences should be granted to distributors.

U.S. demands to change the import licence allocation system are – in comparison to the swath of measures facing the auto sector – small and specific, said Mr. Fry.

It is also not tantamount to offering the U.S. more dairy market access. In June last year, the House of Commons passed a bill that would prevent the federal government from granting trading partners more access to supply-managed markets. Reallocating import licences is not equivalent to additional access, said Mr. Fry.

However, the problem is not with the specific demands, but about the tactics used, he said.

“This is not some ideological contest around the value of supply management and government intervention, this is rent extraction.”

The USMCA has a mechanism by which the U.S. could dispute the allocation of dairy import licences, said Rambod Behboodi, trade lawyer and senior counsel at Borden Ladner Gervais LLP. The EU won this concession during negotiation on a free-trade agreement, which would have required they give up something in return.

Should Mr. Trump win this concession without going through formal channels, there would be nothing stopping him from using the tactic again every time two countries in a free-trade agreement have a specific deal the U.S. wants, said Mr. Behboodi.

“By just giving in, you’re accepting the fundamental premise of the entire thing. I just don’t see that the government of Canada could make that concession.”

Editor’s note: An earlier version of this article incorrectly reported the figures for imports of cheese from the United States and European Union as being in tonnes. This version has been corrected.