Trump will definitely be pushing hard for dairy concessions but Carney cannot afford to cave on supply management.
By Sheila Copps
First published in The Hill Times on July 7, 2025.
To cave or not to cave, that is the question.
According to Karoline Leavitt, the White House’s press secretary, Canada caved.
According to Prime Minister Mark Carney, his administration cancelled a tax initiative of the previous government in order to get trade negotiations back on track.
Carney knew there would not be too much push back in Canada since the tax was opposed by Conservatives and poorly understood by Canadians.
The trade-off of continuing negotiations in lieu of taxing American high-tech companies in the short term seems like a fairly easy call.
Many workers in the steel, aluminum, and auto industries are already seeing their jobs affected by American tariffs, so the sooner an agreement can be reached between Canada and the United States, the better.
But Leavitt’s crowing from the podium did allow Conservative Party Leader Pierre Poilievre to claim that the government has its elbows down in the fight for Canadian jobs.
To be fair, Finance Minister François-Philippe Champagne’s announcement of the cancellation of the Digital Services Tax was met with a major yawn by the public.
But those in the know understand that the tax mimicked a similar levy already imposed by the European Union, with countries like France and Spain already imposing a three-per-cent tax on companies providing certain digital services. In France, the tax is levied on firms with global revenues in excess of 750-million euros and in excess of revenues of 25-million in France.
Turkey has a DST more than double that of EU countries, with the levy weighing in at 7.5 per cent.
Canada has been a leader in finding ways to fund local content via the tax system, and it was fully expected in the streaming world that the digital tax passed last year was untouchable. It was not widely debated and as late as last week, Champagne confirmed the tax would be going ahead.
That was then and this is now. Carney obviously took a look at the big picture and decided he could afford to cancel the tax with little political punishment.
But there are other elements facing much more opposition if Carney plans to meet the deadline of July 21 for a trade agreement with the U.S. That was the timeline tentatively established by the American president and the Canadian prime minister at their G7 meeting in Kananaskis, Alta.
Trump keeps reinforcing his government’s opposition to Canada’s supply management system in our dairy industry.
That is one issue that is widely understood and broadly supported by all political parties.
It has even been subject to the provision that no government could eliminate supply management without a parliamentary vote.
The government and all opposition parties support the Canadian supply management system that limits imports of dairy products including milk and cheese, and adds heavy tariffs to some dairy items.
In reality, the heavy fees that Trump keeps referring to have never actually been applied because no American companies have imported enough dairy products into Canada to trigger the fee.
But on every occasion, Trump keeps referring to how “nasty” Canadian negotiators are, and how he would like to see the dairy system released from any agreement on supply management.
This is one hurdle that Carney will not be able to bypass as easily as he did with the DST.
The Bloc Québécois and the Tories have already indicated their support for retaining supply management. The only party that opposes it is the People’s Party, led by Maxime Bernier, which has no seats in Parliament. In fact, it was Bernier’s opposition to supply management that cost him the Conservative Party leadership in 2017. He was leading in 12 rounds of voting against Andrew Scheer and eventually lost the Tory leadership because of the support Scheer received from dairy farmers in Quebec.
Carney is committed to the July deadline for a trade agreement, but the pursuit of a deal will definitely put supply management on the line.
And this is one area where “elbows up” is required on the Canadian side. Carney cannot afford to cave on supply management ,and Trump will definitely be pushing hard for dairy concessions.
The political damage Carney would suffer from giving up on supply management is equally as important as the fight for steel, autos, and aluminum.
If Leavitt was crowing about Canada caving on the digital tax, she would be absolutely ecstatic if supply management were sacrificed to the larger trade agenda.
Carney’s elbows up strategy has worked so far. But the stakes are getting higher.
Sheila Copps is a former Jean Chrétien-era cabinet minister and a former deputy prime minister. Follow her on Twitter at @Sheila_Copps.
