Navigating Uncertain Waters: The Impact of New Tariffs on U.S. Dairy Farmers

Tue, 04 Feb 2025 15:10:37 GMT

Amidst a backdrop of economic uncertainty, the dairy industry in the U.S. is about to embark on a challenging journey in 2025. The recent executive orders signed by President Trump have introduced significant tariffs on goods imported from key trading partners. With 25% tariffs on most goods from Mexico and Canada, and 10% on goods from China, the ramifications for U.S. dairy farmers could be profound.

Understanding the Impact of Tariffs
Charles Nicholson, an adjunct associate professor in the School of Integrative Plant Science at Cornell University, suggests that the combination of these new tariffs, alongside deportations and potential cuts in food and nutrition spending, could culminate in a staggering $6 billion loss in profits for U.S. dairy farmers over the next four years. Speaking at the 2025 Dyson Agricultural and Food Business Outlook conference, held January 17, Nicholson noted, “If you pick a trade fight with our major export destinations – Mexico, Canada and China – and they decide to retaliate, that has some substantive negative implications for dairy farms and processors.”

Importance of Key Export Markets
Mexico, Canada, and China are pivotal to the U.S. dairy export landscape, accounting collectively for over half of the nation’s dairy exports by value annually. History has shown us the risks associated with trade instability. For instance, retaliatory tariffs from China alone resulted in an approximate $2.6 billion in lost revenues for U.S. dairy farms from 2019 to 2021. This underscores the potential financial hazards that could lie ahead.

Market Reaction
The initial announcement sent ripples through the markets, with stakeholders bracing for retaliatory actions from Mexico, Canada, and China. However, a temporary delay in Mexico’s tariffs provided a brief reprieve. Canada, meanwhile, has already released a list of products subject to their own set of 25% tariffs, which include key dairy products like milk, cream, and butter. Mike North, president of Ever.Ag, shared that Monday’s trade was a little calmer as news broke of a delay to Mexico’s tariff following discussions between the countries’ leaders that saw a movement of Mexican troops to the border. Although he notes that these tariffs, especially on cream and butter, could greatly affect U.S. dairy prices, as Canada is a major export destination.

North says perhaps the bigger question that lingers is how long these measures remain in place.

“Predictably, this will add volatility to demand that may overshadow the ongoing focus around supply,” he says. “Only small changes can have large impacts on price. Producers are well advised to brace for the disruption that these tariffs will likely create.”

A Call for Diplomacy and Resolution
In light of these developments, Krysta Harden, the President and CEO of the U.S. Dairy Export Council, has issued a statement advocating for resolution through dialogue. Highlighting the announcement, she stated, “Yesterday President Trump signed three Executive Orders imposing 25% tariffs on most goods from Mexico and Canada and 10% tariffs on goods from China, all of which are set to go into effect on Tuesday, Feb. 4. The White House cited the ongoing flow of illicit drugs into the United States as the primary reason behind the imposition of tariffs. While this legitimate concern needs to be swiftly addressed, we urge discussions between all countries involved to resolve the issues in a manner that preserves the livelihoods of dairy farmers and manufacturers in rural America.”

The International Dairy Foods Association (IDFA) released the following statement in response to the tariffs:

“The U.S. dairy industry is watching closely as the President and his Administration leverage U.S. law and tariffs as a negotiating tool to strengthen America’s national security. We know the Administration understands that robust market access to Canada, Mexico, and China—our three largest trading partners—is critical to the future of U.S. dairy, and we remain hopeful that the President and his Administration do everything in their power to ensure the tariffs avoid unintended impacts on our dairy farmers and processors, including the potential for retaliatory tariffs on U.S. dairy exports. IDFA remains committed to working with the Trump Administration to expand trade opportunities for our industry, and we urge the Administration to continue proactive negotiations with our top trading partners to ensure dairy trade continues to grow.”

As the industry braces itself for a tumultuous road ahead, it is crucial for stakeholders across the board to engage in constructive dialogue and seek resolutions that protect the backbone of rural America – our dairy farmers. The repercussions of these international trade policies are significant, and the actions taken now will shape the landscape of the dairy industry for years to come.

Your Next Read:
3 Key Dairy Market Stories to Watch in 2025