Webinar Looks At Dairy Trade In Context Of Tariffs, Economy
As higher tariffs and the threat of more tariffs have injected volatility into global trade and economies, U.S. dairy exporters still can find good opportunities to sell their products overseas, according to a panel of experts who presented during a webinar hosted yesterday by the Wisconsin Cheese Makers Association (WCMA).
A Historical Perspective On Tariffs And Trade
Andy Novakovic, emeritus professor of dairy economics at Cornell University, offered a historical perspective on tariffs. He explained that before the Great Depression that spurred a transformation of the federal government, tariffs were a major source of revenue, along with some excise taxes and the sale of federal land. High tariffs also were used from time to time to protect certain industries before the United States became a global economic power. While tariff rates fluctuated, they typically remained very high until after World War II, when a multinational initiative began to gradually eliminate trade barriers.
Today, sources of federal revenue are very different, Novakovic said, pointing out that customs duties make up a very small percentage of revenue, compared to various taxes, social insurance and retirement.
Novakovic said the debate continues over how much high tariffs in the past have helped or hurt, but there is a general feeling among the core economic community on the virtue of free trade, which allows businesses in all countries to focus on what they do best.
The Economic Impact Of Trade Restrictions
“When there are restrictions on trade — tariffs, sales tax, quotas — they are introducing a cost, and costs are a drag on commercial and economic activity,” he said.
When there is uncertainty in the environment, that is a cost as well, he added.
“We don’t want more costs in the system than we need. Distrust is a deterrent to business relationships. We are destroying that trust,” Novakovic said. “Trading partners, we understand, some are beyond concerned over actions that are being taken. This adds to our challenges.”
However, exporters should avoid a “woe is me” mentality and figure out how to be resilient and do their best.
“Come back and ask, are we providing an affordable, high-quality product at a reasonable cost?” he said. “The other thing is to work on the trust line. ‘One thing you can count on is me, and my integrity as a business partner.’ You may have to be more selective on trading partners in the short term. I think we want to focus on what we can do and not get too caught up on what’s harder to do.”
Why Tariffs Matter For U.S. Dairy Trade
Chuck Nicholson, associate professor of agricultural and applied economics at the University of Wisconsin-Madison, addressed why tariffs are important for U.S. dairy trade.
“It’s fairly important to think about tariffs in dairy trade,” he said, pointing to the three main U.S. dairy trading partners — Mexico, Canada and China.
Nicholson also explained that most recent growth in dairy sales has been through the expansion of export markets — more than one-fifth of total U.S. milk production on a solids basis now goes toward exports.
In January, when looking at the potential impacts of the new administration’s trade policies, he noted it was fairly sobering to see the change in net operating incomes, and the value of U.S. dairy product exports was down considerably.
However, Nicholson said there also is an opportunity to grow dairy export markets, as well as benefits to dairy farmers who might see lower domestic feed costs as a result of China’s high tariffs. The primary restraints on dairy trade will be from retaliatory tariffs from major markets in China and Canada.
U.S. Dairy Exports By The Numbers
Based on an average of monthly simulation modeling results for March 2025 to January 2029, Nicholson outlined likely impacts of retaliatory tariffs from Canada and China. He noted the value of total U.S. dairy product exports could drop 26%, U.S. cheese exports 18% to 25%, and U.S. whey exports 12% to 30%.
So far, Mexico has held back on retaliation, and dairy has been dropped from retaliation from the European Union (EU), he added.
“Dairy also dodged a bullet with the EU — initially they would have included dairy but reached a consensus that dairy and alcoholic beverages from the U.S. were exempt from retaliatory tariffs,” Nicholson said.
Strategic Responses To Tariff Challenges
The final webinar presenter was Jacqueline Cook, vice president of dairy sales USA for Ausfine Foods and owner and president, Cook Alpine Ltd. A grant from the Wisconsin Department of Agriculture, Trade and Consumer Protection funds consulting hours with Cook for dairy processors in the state.
Cook addressed how dairy exporters can protect themselves as well as see opportunity in uncertain times.
“Two things you can still do in uncertain times are one, diversify product offerings, and two, cultivate strong relationships with foreign buyers,” she said. “You want to foster relationships and maintain them. As we have seen, this could change overnight. You want to be that trusted supplier for these buyers. This also can be a test to see how trustworthy and committed you are as a partner. Let them know they are still important to you and maintain that close relationship. You want them to call when there is an opportunity to come back — and when it does, it can be so quickly.”
Exporters also should adopt a problem-solving mentality, Cook said, and work closely with customers and traders who have boots on the ground.
It is crucial in this ever-changing environment as well to stay in touch and informed, understanding all regulations, she advised.
“As a negotiation evolves, you will find out what products there are exemptions for. What codes are affected, and what are the standards of identity?” she said
She suggested understanding various countries and building relationships by understanding the different licenses, as well as building a competitive advantage by knowing what products might be able to fall into different codes.
Protecting Dairy Export Businesses Through Strategy
When safeguarding against tariffs, Cook said transparency is key. Exporters should prepare for different scenarios and come up with a plan for all of them. She also advised attendees to ask for partial prepayment or a letter of credit, or alternatively to carry credit insurance. Sellers should include a clause in sales orders that the consignee bears any additional tariff costs, and they should monitor trade policy changes frequently, staying ahead of announcements.
“Don’t shy away when tariffs are announced. There may be a niche advantage. Be ready to make a move if a window opens,” she said. “Tariffs can be an opportunity, especially if negotiations start to open some windows. They can be a catalyst for strategic action.”
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Source: Cheese Market News
