The U.S. cheese industry is feeling the effects of the recent tariffs. In response to the U.S.’s tariffs on Mexican steel and aluminum, Mexico has placed a 15 percent tariff—expected to rise to 25 percent—on cheese hailing from the states, according to the Wall Street Journal (WSJ). China is also implementing its own measure against the U.S., the news source relays, with tariffs on $34 billion of U.S. goods, including cheese and whey.
In a recent letter to the President, dated June 26th, dairy farmers expressed their concerns.
“Through investment and cooperation with Mexico, we have succeeded in becoming the country’s biggest foreign dairy supplier, with cheese purchases last year alone totaling nearly $400 million. Today, Mexico accounts for approximately one-quarter of foreign demand for Made-in-America dairy products and is our most reliable trading partner,” the letter says. “Unfortunately, our share of the Mexican market is in grave jeopardy. Mexico included U.S. cheeses on its list of products now subject to tariffs in retaliation for U.S. actions on steel and aluminum imports. These tariffs–which will reach as high as 25%–will diminish foreign demand for high-quality U.S. dairy products that are produced across the country and support nearly 3 million American jobs.”
All eyes are on the next turn of events, since U.S. dairy exports only recently hit an all-time high in April, the U.S. Dairy Export Council shared. Further, almost one-fifth of U.S. milk leaves the country, with exports of dairy practically doubling over the course of the past decade. Dairy farmers have achieved these levels of success by marketing dairy products, like cheese, to growing middle-class populations in Mexico and Asia, the news source explains.
Tariffed items were chosen “that have implications in some districts where there’s important congressmen and senators… because, finally, the effect will fall on voters and citizens that live in the districts of people who have a voice and vote in the American Congress,” Former Commerce Secretary Carlos Gutierrez said, according to Politico.
So, what are the numbers behind how these tariffs impact the industry? WSJ says $578 million worth of U.S. dairy goods to Mexico will feel the result of this tariff, and $408 million worth of cheese to China could see an impact from duties changes.
Ultimately, the dairy farmers are looking for a quick resolution to the issue at hand, with full faith in the dissolution of tariff tensions once NAFTA negotiations are completed.
“We ask that your Administration focus U.S. efforts on working collaboratively with Mexico to find a mutually agreeable way forward, and we believe placing tariffs on hold in the interim would prevent the loss of hardearned market share to the EU. We ask that you again suspend Section 232 steel and aluminum tariffs on Mexican products until the NAFTA renegotiation is completed, particularly in light of Mexico’s willingness to constructively engage with U.S. negotiators,” the letter from the dairy farmers pleads.
With more cheese in cold storage than any other time since the U.S. Department of Agriculture began keeping track in 1917, the prices for barrels of cheese is falling.
This has been a tough year for milk, too, with prices falling to $14 per hundredweight, or 100 pounds, from its high-water mark of $24 per hundredweight in 2014. Selling dairy and dairy products like cheese abroad was helping, WSJ expresses, but with these new tariffs in place, the prices might be dropping yet again.
What will these tariffs do to dairy prices, and how will that reflect on the rest of the dairy industry? Deli Market News will keep you updated with the latest.