How Trump’s ‘Liberation Day’ impacts global dairy markets

The US imposed a flat 10% tariff on all imports – but some of its trade partners, including the EU and China, are facing steeper rates. The flat levy would not apply to Canada and Mexico, who are already subject to tariffs.

The 10% tariff comes into force on April 5, 2025 (Saturday), with the higher rates kicking in from midnight on April 9.

We look at how tariffs are likely to impact key dairy-producing global regions, including the EU, China, Australia and New Zealand.

European Union (20%)

The US has long had beef with the EU over geographical indications (GIs) for cheese. GIs – which encompass around 3,500 agricultural products, wines and spirit drinks – are a type of trade mark and a way for European producers to promote their regions’ cultural heritage.

The designations also mean US cheesemakers cannot call their products ‘feta’ or ‘gorgonzola’ on the EU market because these terms are reserved for use by regionally-made cheeses.

A decade ago, the EU caused a stir with US cheesemakers by wanting to restrict the use of terms such as parmesan on US-made cheese, too. And the bloc has pushed for such protections in trade negotiations with other countries, such as India.

EU’s politics has been seen as hostile by some US trade groups. The Consortium for Common Food Names, a non-profit that advocates the rights of producers to use common names, says the EU has been ‘a leading offender of the rights of common name food and beverage producers. The US Dairy Export Council says the issue ‘is about more than just lexicon. “If Europe secures exclusive use of feta, parmesan, gorgonzola, asiago and other common cheese names, it could reduce consumption of US cheese 21% over 10 years and cost US dairy farmers a cumulative $59bn,” the organization estimates.

But the European Dairy Association has said EU cheese does not directly compete with US products and represent a small part of the cheese industry in the States.

Alexander Anton commented: “EU dairy exports – most notably cheese – account for less than 2% of total US domestic consumption. These cheeses serve a very unique market segment in the US, offering choice and excellence to the US consumers, and therefore do not compete directly with American dairy products.

“Not only have the US and the EU the largest bilateral trade and investment relationship and the most integrated economic relationship in the world, but the overall (goods & services) US-EU trade balance is basically in an equilibrium – this is an ideal basis for a prosperous trade relationship.

“A trade dispute between the US and the EU therefore is clearly in the lose-lose category.”

He added the timing could not be worse.

“Our sector is already under enormous pressure from China’s anti-subsidy investigation and ongoing global market challenges. Now, US tariffs risk compounding that crisis.

The trade body has urged the European Commission to respond strategically. “Trade policy must be smart, not punitive,” Anton added. “Dairy is not the problem here using it as a pawn only creates new problems on both sides of the Atlantic.”

Ireland – a major dairy and whiskey exporter – is also bracing for the impact of tariffs. Ireland exported 11% of its food and drink products to the US, generating €1.9bn, with whiskey (€900m) and dairy (€830m) accounting for 91% of the total followed by pork (€23m), beef (€8.8m) and seafood (€3.8m).

The Irish Farmers Association (IFA) expects products such as Kerrygold butter to be impacted. “Kerrygold is now the second best-selling butter brand in the US, where we sent almost €500m worth of product in 2024,” said IFA in a statement. “The market accounts for about 7.5% of our total dairy exports.

“The fact that New Zealand only has a 10% tariff for dairy products and the UK only has a 10% tariff on drinks, while the EU will have 20% tariffs, will leave us at a competitive disadvantage against some of our biggest competitors in these two sectors.”

The EU’s response is still unclear at the time of writing, though European officials have said they would prefer negotiations instead of reciprocal tariffs. The bloc is set to impose a package of countermeasures worth €26bn in response to US-imposed steel and aluminum tariffs; these EU measures kick in from mid April and match the scope of the US tariffs, valued at $28bn.

Luis de Guindos, Vice President of the European Central Bank, has said ‘an extraordinarily high level of uncertainty around economic and trade policy has been acting as a drag on markets and the economy alike’ adding the ECB was ‘exploring unconventional sources of risk and vulnerability and using a broader range of tools…to assess the resilience of the financial system’.

New Zealand (10%)

New Zealand’s dairy exports formed more than a quarter (29%) of all goods exports to the rest of the world in the year to December 2024. The country exported NZ$20.5bn worth of dairy during the period, with the US only its fourth largest export market for dairy, where it shipped NZ$980m worth of product.

The majority of New Zealand’s dairy exports for the period went to China (NZ$6.4bn worth), Indonesia (NZ$1.08bn) and Australia (NZ$990m). The country’s three main dairy export commodities are milk powder (NZ$9.81bn), butter (NZ$4.64bn), and cheese (NZ$2.74bn).

New Zealand restricts imports of US pork but has a long-standing FTA with the country with an average applied tariff rate of 1.4% for agricultural products in 2023.

Agriculture minister Todd McClay remained upbeat in his response.

“While these tariffs create additional costs that will largely be passed on to consumers, New Zealand is in a stronger position than many other countries, some who are facing higher tariff barriers,” he said. “This reinforces the importance of our work to create new trade opportunities and reduce barriers for our exporters in the EU, UK, UAE, GCC and most recently, India.”

Australia (10%)

Australia is also facing the 10% flat rate, with the country’s US$3bn worth of beef exports singled out by US president Trump who highlighted Australia’s ban on fresh US beef imports in his speech.

According to the latest US Foreign Trade Barriers report, the US continues to seek full market access for fresh US beef and beef products.

Australia’s Red Meat Advisory Council noted that around six billion hamburgers consumed each year in the US are made from Australian beef – and tariffs will cost the US consumer an additional US$180bn per year.

The organization’s chair John McKillop played down the impact on Australian meat exporters, stating that 91% of beef, 74% of sheep and 89% of goat meat exports traded globally are covered under existing FTAs.

“It’s critical to note just how diversified Australia is with our red meat exports,” he said. “Other major markets include Greater China, Japan and Korea, worth AU$3.9bn, AU$2.6bn and AU$2.5bn respectively. The Middle East / North Africa Market is worth A$2bn and offers demand growth opportunities.”

Australia has an active FTA with the US, allowing duty-free access to all US agrifood imports bar fresh beef, pork, poultry, apples and pears.

Dairy is a less export-focused industry than beef for Australia, but will also be subject to the 10% levy. The US isn’t a major export destination for Australian dairy, however.

Around 37% of the nation’s dairy produce is exported, with China (29% market share), Japan (14.4%), Indonesia (7.9%), Malaysia (6.9%) and Singapore (6.1%) the main export destinations in recent years.

According to Rural Bank’s export report, Australian dairy export value rose by AU$69m in 2023-24 to a total of AU$3.1bn, up 13.6% versus the five-year average. Cheese and curd were the major growth contributors and made up 35.7% of total value of dairy exports. Cheese shipments reached a record high at AU$1.21bn, with volume lifting 17.5% year-on-year to 151,000 tons. The average export price of AU$7,435 per ton, while down 4.5% year-on-year, was the second highest on record.

Australia also imported a record amount of dairy last year, bringing in A$1.65bn worth of dairy, with New Zealand the primary source of Australia’s dairy imports with 59.7% share. Imports are forecast to fall in 2024/25 however as domestic milk supply is projected to remain flat to lower this season.

Australian dairy farmers have enjoyed strong returns in recent years, with farm income in the three years to 2023/24 being 130% higher than the average for the previous 10 years. This is tied to record high milk prices in 2022/23 and reduced expenditure on key inputs like energy, fertiliser, chemicals and animal feed. Australian farmgate prices averaged around $9.51/kg MS in 2023-24 and were around 33% higher than New Zealand’s.

China (54%)

President Trump announced additional 34% tariffs on Chinese goods, with the total levy now at 54% when factoring in the 20% rate announced earlier this year.

The Chinese foreign ministry spokesperson Guo Jiakun said the new raft of US tariffs ‘seriously violate WTO rules and seriously damage the rules-based multilateral trading system’.

“China firmly opposes this and will take necessary measures to firmly safeguard its legitimate interests,” the spokesperson said. “China has repeatedly stressed that there are no winners in trade wars and tariff wars, and protectionism has no solution.

“China urges the United States to correct its wrong practices and negotiate with all countries in the world, including China, to resolve trade differences in an equal, respectful and mutually beneficial manner.”

Asked if China would retaliate before the 34% levy takes effect on April 9, he added: “What the US needs to do now is to correct its wrong practices and negotiate with all countries (…).

“It is clear that more and more countries oppose the unilateral bullying behavior of the US, such as the increase in tariffs,” he concluded.

China is the third largest export market for US dairy, worth $584m in 2024. According to the US Dairy Export Council, US dairy exports to China declined in 2024, marking the lowest year since 2020.

ING says the US-imposed tariffs would hit China’s economy and risks a strong response, both in terms of domestic stimulus measures and reciprocal trade tariffs.

China has already slapped US food and drink exports with up to 15% levy in response to an earlier tranche of Trump tariffs – with US dairy imports subject to a 10% tariff.

Additional levies could harm US producers more than China’s own domestic industry, which is heavily supported by the Chinese government through subsidies.

In fact, support for beef and dairy producers was outlined in China’s latest Document #1 – detailing measures the People’s Party will take to protect food security and agriculture – as the country aims to reduce its reliance on imports.

Among the US trade bodies responding to the tariff announcements, the International Dairy Foods Association stressed that ‘broad and prolonged tariffs on our top trading partners and growing markets will risk undermining our investments, raising costs for American businesses and consumers, and creating uncertainty for American dairy farmers and rural communities’.

“The US dairy industry exports more than $8bn of high-quality dairy products every year to approximately 145 countries around the world,” said senior Vice President of trade and workforce policy, Becky Rasdall Vargas.

“To meet growing global demand, dairy businesses have invested $8 billion in new processing capacity here in the United States – creating jobs, strengthening rural economies, and positioning America as the world’s leading dairy supplier. This growth depends on strong trade relationships and access to essential ingredients, finished goods, packaging, and equipment to provide Americans with safe, affordable, and nutritious dairy foods and beverages.”