84% Chinese tariffs slam US dairy exports. Prices plunge, markets scramble. Can producers pivot fast enough to survive?
EXECUTIVE SUMMARY: Escalating US-China trade tensions have triggered an 84% retaliatory tariff on critical dairy exports like whey and lactose, threatening over $500M in annual US sales. With China absorbing 42% of US whey and 72% of US lactose exports, domestic prices face collapse as surplus product floods markets. Historical parallels to 2019’s 55% export drop suggest even steeper declines now, compounded by expanded US production capacity. New Zealand and the EU stand to gain market share via trade agreements, while US producers must urgently diversify to Mexico/SE Asia and shift to value-added products like cheese. This crisis underscores the peril of over-reliance on a single export partner in volatile trade climates.
KEY TAKEAWAYS:
- Tariff Tsunami: 84% Chinese tariffs make US whey/lactose uncompetitive overnight, risking $584M in annual exports
- History Repeating: 2019’s 25% tariff caused 55% export drop – 2025’s higher rates could be catastrophic
- Global Reshuffle: NZ’s duty-free access and EU’s food-grade products position them to exploit US losses
- Survival Playbook: Producers must target Mexico/SE Asia markets, pivot to cheese/butter, and lock in forward contracts
- Domino Effect: US milk prices could follow whey’s downward spiral, squeezing margins for farmers and processors
The escalating trade war between the United States and China has thrown a massive wrench into the dairy export machine. With retaliatory tariffs reaching 84% on critical dairy ingredients like whey and lactose, over $500 million in US dairy exports to China hang in the balance. This trade disruption comes at the worst possible time – just as US processors have expanded production capacity and China’s domestic milk output is forecast to decline by 2.6% in 2025.
The Tariff Time Bomb: A 90-Day Fuse
The US-China trade relationship deteriorated quickly in early 2025, with tariffs skyrocketing through tit-for-tat retaliations.
What began as manageable trade friction has morphed into a full-blown trade war:
- February 4: The US imposed an initial 10% tariff on Chinese goods
- March 3-4: US tariffs jumped to 20%
- March 10: China retaliated with 10% tariffs on US dairy products
- April 2: The US announced “Reciprocal Tariffs” with a baseline 10% global tariff and an additional 34% on China
- April 4-8: China announced a matching 34% retaliatory tariff
- April 9: The US paused new tariffs for most countries but dramatically increased the China-specific rate to 125%
- April 10: China matched with an 84% retaliatory tariff on US goods
This lightning-fast escalation has created a perfect storm for US dairy exporters. Unlike previous trade disputes, China has explicitly denied exemptions for agricultural tariffs, removing potential avenues for relief.
“China’s 84% tariff on US goods came into force Thursday, April 10,” confirms the National Milk Producers Federation. “The tariffs will certainly hit our exports to China.”
Why This Matters: The China Dependency
The Chinese market represents an outsized portion of US dairy ingredient exports, making it virtually impossible to pivot quickly to alternative destinations without significant price concessions.
China is the third biggest export market for US dairy, with 385,485 metric tons worth $584 million exported in 2024. While this represents growth of 29% over the past decade, recent trends were already concerning – US dairy exports to China fell by 9% in 2024 compared to 2023.
For whey products specifically, the dependency is even more pronounced:
- China purchased 42% of all US whey exports in 2024
- For lactose, China absorbed 110,000 metric tons, representing 72% of China’s total lactose imports
Phil Plourd of Ever.ag captures the industry sentiment: “China takes a lot of US whey products – dry whey, whey protein concentrates, permeate, lactose. US manufacturers and marketers had to be very concerned about the initial 34% levy announced by China. Today, we’re up to 84%, making things more challenging.”
The Fallout: Price Collapse and Supply Chain Disruption
The ramifications extend beyond just lost sales volumes. The entire market dynamics for whey and lactose face significant disruption.
Lessons from 2019
We’ve seen this movie before, but the 2025 version looks considerably worse. During a similar trade dispute in 2019, when China imposed a 25% tariff on US whey products:
- US exports of dry whey and permeate to China plummeted by 55%
- Domestic dry whey prices collapsed by over 35%
- Lactose exports fell 33%
With tariffs now more than triple those 2019 levels and US production capacity expanded, the market impact could be devastating. RaboResearch expects the US dry whey and milk markets to respond similarly to 2019 but with potentially more severe consequences.
The New Zealand Advantage
New Zealand enjoys a massive competitive edge thanks to its Free Trade Agreement with China, which grants duty-free access. This creates a price gap that’s nearly impossible for US exporters to overcome.
The 84% tariff makes US dairy exports to China effectively 104% more expensive than New Zealand’s duty-free shipments. New Zealand is already China’s largest dairy supplier, accounting for 51% of imports in the first half of 2024.
Global Winners and Losers
The disruption of established US-China trade channels creates opportunities and challenges across the global dairy landscape.
Who Stands to Gain?
The clear winners include dairy exporters from regions with better market access to China:
New Zealand: With its Free Trade Agreement granting duty-free access, New Zealand is perfectly positioned to capitalize on US exclusion.
European Union: Already supplying 35% of China’s whey imports, the EU stands to capture additional market share, particularly in higher-value segments. EU milk production is forecast to increase by 0.5% year-on-year in 2025.
South America: Argentina has the potential to increase milk production (forecast +4% in 2025) and strengthen its position as a dairy exporter.
Can Anyone Fully Replace US Supply?
Despite opportunities for competitors, the ability of alternative suppliers to fully replace US volumes appears limited:
- Production Constraints: Milk production growth in the EU is projected to be modest (around 0.5% in 2025)
- Different Product Profiles: Much of EU lactose exports to China are higher-quality, higher-priced materials, making them imperfect substitutes for US feed-grade lactose
- China’s Shrinking Demand: China’s milk production is forecast to decline by 2.6% in 2025, marking the second consecutive year of contraction
Your Survival Playbook: Strategic Moves for Dairy Producers
With the Chinese market effectively closed by prohibitive tariffs, US dairy stakeholders must rapidly pivot to minimize damage:
1. Diversify Export Markets
Mexico and Southeast Asia represent the most promising alternatives. US dairy exports to Mexico rose 8% in value in February 2025, while February exports to China increased 4% before the tariff spike.
Focus on cheese and high-value products – cheese exports to China jumped 649% in February 2025 compared to the previous year, showing strong demand for specialty products even amid trade tensions.
2. Shift Product Mix
The market signals are clear – commodity ingredients face the biggest hit while value-added products show resilience:
- Cheese exports boomed 14% in February 2025
- Butter shipments surged 126%
- Meanwhile, nonfat dry milk collapsed by 28%
This divergence suggests producers should prioritize milk components (fat and protein) that support higher-value product streams rather than focusing on volume.
3. Lock in Contracts and Hedge
With milk futures having already dropped 12% on tariff threats alone, forward contracting and price hedging are essential risk management tools. The 90-day tariff pause for most countries provides a brief window to secure alternative arrangements.
The Bottom Line
The 84% tariff wall between America’s massive whey and lactose production and China’s substantial ingredient demand represents a seismic disruption in the global dairy trade. While diplomatic solutions remain possible, the immediate outlook indicates significant pain for US producers and international supply chain adjustments.
The crisis underscores the inherent risks of concentrated export dependence for US dairy stakeholders. Smart producers will use this wake-up call to accelerate market diversification, shift toward value-added products, and implement robust risk management strategies.
Rabobank’s Q1 Global Dairy Quarterly report notes that global dairy prices are expected to remain elevated despite modest global supply growth of 0.8% in 2025. This suggests that producers who can navigate the trade turbulence and access alternative markets may still find profitable opportunities amid the chaos.
Your Move: Is your operation ready to pivot from China’s dependency to new markets and product streams? The dairy operations that survive and thrive will adapt fastest to this new trade reality.
Learn more:
- Why Milk Prices Already Dropped 12% Before Tariffs Hit
Explore how tariff threats alone caused a 12% plunge in milk prices, with $8.2 billion in exports at risk. Learn survival strategies for farmers navigating market volatility. - China Slaps 10% Tariff on US Dairy: Exporters Face New Market Challenges
This article examines the early stages of China’s retaliatory tariffs, their immediate impact on U.S. dairy competitiveness, and the ripple effects on supply chains. - How Trump’s Tariffs Threaten Your Herd’s Bottom Line
Dive into the broader implications of Trump’s sweeping tariffs, with $16.6 billion in dairy exports at stake. Discover actionable strategies for farmers to mitigate losses and adapt to shifting trade dynamics.
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