Turning Sour: A US-EU Trade War Would Result in Dairy Winners and Losers

The makings of a trade war between the US and the EU are brewing. On April 12, 2019, the United States Trade Representative (USTR) announced that it is considering levying additional tariffs on European products included in 317 tariff codes, valued at approximately USD 21bn. The recent announcement publicizes a more-than-a-decade-old dispute between the US and the EU. While butter, cheese, and yogurt imports account for a small percentage of US supply, and EU exports to the US represent a small percentage of European output, additional tariffs on selected European dairy exports to the US will create winners and losers in the latest trade saga.

 

 

“In general, specialty European cheeses are high value and not necessarily as price sensitive at the retail level,” says Mary Ledman, Global Strategist – Dairy. “However, a 100% surcharge on top of an already pricey product could have customers choosing a less-expensive domestic cheese or non-EU import.

Many imported European cheeses are marketed and distributed by specialty food companies, which also carry domestic specialty cheeses in their product lines. As a result, an additional 100% tariff on European cheeses is likely to reduce the competitiveness of European cheeses in the US market, decrease the promotional activity of European cheeses, encourage US consumers to explore less-costly domestic specialty cheeses, and provide a competitive advantage to non-EU imported specialty cheeses.”

In this case, the winners would include, but not be limited to, the specialty dairy manufacturers across the US and in Australia, Canada, New Zealand, Norway, Switzerland, and other non-EU countries. Individually, the biggest loser is likely to be Ireland, with nearly 34,500 metric tons of annual dairy exports at risk of higher tariffs. Collectively, the EU-28 can ill afford to lose the US as a market for over 100,000 metric tons of cheese, especially with the uncertainty of a hard Brexit looming, which would place the United Kingdom’s 400,000 metric ton cheese market up for grabs.

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