EU slaps $28B in tariffs on US goods, including dairy. But is this trade war a blessing in disguise for American dairy farmers? The answer may surprise you.
EXECUTIVE SUMMARY: The EU’s announcement of $28 billion in counter tariffs on US goods, including dairy products, adds another layer of complexity to an already turbulent global trade landscape for American dairy producers. While these tariffs threaten established trade flows, USDA data shows US dairy exports remain strong, with projections reaching $8.5 billion for fiscal 2025. The article reveals a nuanced picture of US-Canada dairy trade, highlighting underutilized quotas and complex market access issues. Despite challenges, some industry leaders see the current trade tensions as an opportunity to address longstanding imbalances, particularly with the EU. The piece offers practical strategies for dairy producers to navigate this volatile environment, emphasizing the importance of understanding regional impacts, implementing layered risk management, and maintaining production flexibility.
KEY TAKEAWAYS:
- EU announces $28B in counter tariffs on US goods, including dairy, amid ongoing global trade tensions
- USDA projects strong US dairy exports for 2025 despite trade challenges, forecasting $8.5 billion
- US dairy exporters currently utilize only 42% of their available tariff-free quota to Canada, revealing complex market access issues beyond headline tariff rates
- Industry experts recommend tailored risk management strategies and production flexibility to navigate trade volatility
- Some US dairy leaders view trade tensions as an opportunity to address longstanding market access imbalances, particularly with the EU
The European Union has announced sweeping counter-tariffs targeting $28 billion worth of American goods, including dairy products. This latest development adds to mounting trade pressures facing US dairy producers, who are already navigating trade tensions with Canada and China. With multiple trading partners implementing restrictions simultaneously, US dairy exports face unprecedented challenges in global markets.
DAIRY INDUSTRY CAUGHT IN CROSSFIRE OF GLOBAL TRADE TENSIONS
The global dairy trade landscape is experiencing unprecedented turbulence as the European Union becomes the latest trading partner to announce retaliatory measures against the United States. This EU announcement creates a complex trade environment where multiple major US dairy export markets implement trade barriers simultaneously.
European Commission President Ursula von der Leyen announced the EU will impose tariffs on 26 billion euros ($28 billion) worth of US goods – with dairy products specifically named alongside soybeans, almonds, distilled spirits, and other items.
“We deeply regret this measure. Tariffs are taxes. They are bad for business, and even worse for consumers,” von der Leyen stated during the announcement. “These tariffs are disrupting supply chains. They bring uncertainty to the economy. Jobs are at stake. Prices will go up. In Europe and the United States.”
The timing couldn’t be more challenging for American dairy producers, who shipped $8.02 billion in dairy exports globally in fiscal 2024 and are projected to reach $8.5 billion in fiscal 2025, according to USDA data released in February 2025. This projection was raised by $100 million from earlier forecasts “on increased price competitiveness for US exports of cheese and butter, with robust demand for those products in North America, South America, and the Middle East/North Africa.”
US-CANADA DAIRY RELATIONSHIP: A COMPLEX REALITY
While much political rhetoric has focused on Canadian dairy barriers, official data reveals a more nuanced picture. According to the International Dairy Foods Association, the US exported more than $1 billion of dairy products to Canada in 2022, making it the second-largest market for US dairy exports.
However, US dairy exporters face a complex system of Tariff Rate Quotas (TRQs) when selling to Canada. Under the USMCA agreement negotiated during the Trump administration, Canada agreed to eliminate tariffs on specific quantities of US dairy imports across 14 categories. However, official data shows that US exporters utilize only 42% of their available tariff-free quotas, with 9 of the 14 TRQs falling below half the negotiated value.
This limited utilization suggests the primary challenges for US dairy exports to Canada may lie beyond the headline-grabbing 200%+ tariff rates, which only apply after these quota limits are reached. As Becky Randall, senior vice president of trade and workforce policy at the International Dairy Foods Association, explained: “We don’t love the tariffs, but the main issue is that we can never fill the quota, to begin with,” due to what she describes as Canada’s administrative strategies that limit US market access.
EU-US DAIRY TRADE IMBALANCE
| Direction | Annual Value (USD) |
| EU to US | $3 billion |
| US to EU | $115 million |
The table above illustrates the significant trade imbalance in dairy products between the European Union and the United States, which has persisted despite the US generating billions in global dairy exports. This disparity helps explain why some US dairy officials see the current trade tensions as an opportunity to address longstanding market access issues.
PRACTICAL STRATEGIES FOR DAIRY PRODUCERS AMID TRADE TURMOIL
For American dairy producers navigating this volatile trade environment, University of Wisconsin dairy economists have been modeling impacts and identifying practical approaches:
First, assess your operation’s specific exposure to export markets. With nearly one-fifth of US dairy components exported (mostly nonfat solids), understanding how your milk utilization might be affected by shifting trade flows is critical. Operations selling to processors heavily involved in export markets face risks different from those supplying primarily domestic channels.
Second, implement a layered risk management approach. Leonard Polzin from the University of Wisconsin suggests dairy producers consider the combined impacts of changing trade conditions, labor costs, and domestic consumption patterns. Their economic models show program cuts to nutrition programs like SNAP could reduce domestic dairy demand by approximately 4%, creating additional pressure beyond export challenges.
Third, analyze regional production economics carefully. Dr. Charles Nicholson’s modeling at the University of Wisconsin has identified significant differences in how trade disruptions affect different dairy production regions, with some areas maintaining more substantial margins despite trade challenges.
Fourth, maintain flexibility in production planning. USDA projects increased US dairy exports for 2025 despite trade challenges, and the fundamental global demand for dairy remains strong. Producers who can navigate the near-term market volatility while maintaining production capacity will be positioned to benefit when trade conditions normalize.
THE PATH FORWARD: NAVIGATING DAIRY’S NEW NORMAL
For forward-thinking dairy producers, this period of trade disruption demands both defensive positioning and strategic vision. Jim Mulhern, former president of the National Milk Producers Federation, emphasized the importance of enforcing trade agreements: “We must utilize USMCA’s enforcement mechanisms to bring home its hard-fought wins for America’s dairy farmers.”
According to the International Trade Commission, proper implementation of USMCA provisions could increase US dairy exports by more than $314 million annually – but realizing this potential requires vigilant enforcement of market access provisions.
As this situation unfolds, The Bullvine will continue monitoring developments and providing actionable intelligence for dairy producers navigating these turbulent trade waters. The dairy industry has weathered numerous challenges throughout its history – from regulatory changes to shifting consumer preferences – and has consistently emerged stronger through adaptation and innovation. This trade confrontation represents another challenge to test the industry’s resilience and creativity.
LEARN MORE:
- GLOBAL DAIRY MARKETS ROCKED: US-China-Canada Tariff War Sends Shockwaves Worldwide
- How a Trade War with Mexico Could Devastate the US Dairy Industry
- China’s Dairy Trade Powerplay: German Exports Flow While US Faces 10% Tariff Wall
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