It would be nice to have time to savor real progress, but that seems such a luxury when turbulence is the new normal.
The long overdue end to Mexico’s retaliatory tariffs against U.S. cheese exports last month was a positive development, one of several indicators suggesting that dairy’s fortunes may be improving. But as has often been the case, even that gain was soon thrown into doubt, suggesting that much work remains before we can feel confident we’ve turned the corner on reestablishing a dependable trading relationship with Mexico.
The end of the tariffs also improves prospects for passing the USMCA trade treaty. Mexico has revised its labor laws, which should help gain support for the agreement in the U.S. Congress, and Canada is vowing “full steam ahead” for ratification. Meanwhile, producer margins are improving, and a better safety net is arriving with Dairy Margin Coverage Program signup on pace to begin June 17, giving producers several reasons for greater optimism about dairy’s economic fortunes.
At the same time, turbulence continues with China. New U.S. tariffs on Chinese goods, the result of derailed negotiations between the world’s two largest economies (and the third-biggest importer of U.S. milk), are likely to invite further retaliation, compounding the sharp drop in dairy exports we’ve already seen to China.
To ease the blow for producers, the Trump Administration, through the U.S. Department of Agriculture, has promised to help producers across agricultural commodities to lessen the near-term economic damage from the trade war with up to $16 billion in a new round of aid.
We at NMPF have been in discussions with the department, suggesting how to target limited resources to best ameliorate the damage.
But we don’t yet know what will be in the assistance package, which means yet more question marks; we’ll keep pushing hard for assistance that mitigates the more than $2.3 billion in damages dairy farmers have faced because of the trade war. But no assistance package can completely capture the full effects of the market uncertainty, interrupted relationships and markets lost to unencumbered competitors who are seizing market share. That’s why we certainly hope the aid package isn’t just as fair as possible – we hope it’s the last one farmers need.
Significant work remains on numerous trade policy fronts to help dairy producers fully recover. In addition to working for USMCA passage, we will continue urging the White House to resolve the renewed tariff spat with China and conclude a bilateral agreement that lowers tensions and improves market access. We also need swift and robust progress in trade discussions with Japan, which the president has promised, so that U.S. dairy interests are not further punished by tariffs and TRQs that each year let our European and Oceania competitors gain ground due to the terms of their trade treaties with Japan.
These steps are necessary to provide certainty, opportunities and improved prices for U.S. dairy producers, something badly needed after the economic turmoil of recent years. If dairy truly is getting back on its feet – and positive signs are emerging – then the next step will be to start moving forward. The end of Mexico’s retaliatory tariffs put us on firmer ground. We can move ahead, despite the tremors that continue to shake things up.