North Macedonia has a long tradition of cultivating and exporting oriental tobacco, known for its rich aroma. With 26234 tons produced in 2019 (0.4% of world production and 13.9% of European production), it is among the world’s 30 major tobaccoproducing countries, among the 20 major exporters of raw tobacco, and the second largest producer of oriental tobacco, after Turkey. This research examines tobacco production and the tobacco subsidy policy in North Macedonia and its possible effects, using quantitative (mainly descriptive) analysis of tobacco production, subsidies and related data, and qualitative analysis of observations from interviews with key informants. Tobacco production has been supported by government subsidies for decades, regardless of the political structure. Tobacco receives the largest share of crop subsidies, comprising on average a quarter of total agricultural subsidies for the period 2008–2019. This is justified by the government mainly by the large number of families whose main income is from tobacco production. In addition, tobacco and tobacco product exports account for one fifth of the total export value of agricultural and food products. However, despite high subsidies, tobacco farmers’ average monthly income is lower than the country’s average net monthly salary. The evidence shows that generous tobacco subsidy might affect the market adversely. Subsidies often generate market distortions by ‘blurring’ market signals – farmers often decide to grow crops only because of the subsidies. On the other hand, North Macedonia spends significantly more money on food imports than it generates from tobacco exports. One of the major ongoing challenges of the trade deficit is that much of it comes from importing processed food products. Despite agricultural subsidies, North Macedonia is a net food importer. Hence, it is a relevant question whether funds allocated to tobacco production support could be used more efficiently to stimulate food production instead.