First, there are amounts of dairy products imported tariff-free. A higher tariff applies only after this amount has been reached. In reality, however, the countries exporting products to Canada will not pay the high tariff because they will simply not export more than was negotiated in the trade agreement under which they have access.
This form of “two-step” tariff or “tariff-rate quota” is not unique to Canada nor to dairy. It is a fairly common way to limit quantities imported. Under the agreement between Canada, United States and Mexico (CUSMA) for example, the U.S. has tariff-rate quotas for dairy from Canada and Canada has tariff-rate quotas for dairy from the US.
Canada is the second largest export market for US dairy products, with this tariff-rate quota system, after Mexico. As Canada has fewer citizens than Mexico, it is the biggest client on a per capita basis.
