Dairies suffer from Trump trade wars
New Mexico’s dairy industry is caught in the crossfire of President Donald Trump’s global trade wars.
When the U.S. pulled the trigger on Chinese imports through newly imposed tariffs last May, the U.S. dairy industry took a direct hit from return fire on two fronts.
China slapped 25 percent retaliatory tariffs on all U.S. dairy products. And Mexico imposed a 25 percent tariff on U.S. cheese in response to Trump’s tariffs on steel and aluminum.
The casualties are piling up. Agricultural research firm Informa Economics projects more than $1 billion in lost income nationwide this year as export markets tighten and dairy producers earn less for their products.
New Mexico producers are among the casualties.
“It’s affected us,” said Dale Johnson, co-owner of a 3,000-cow dairy farm at Veguita in Socorro County. “Before the tariffs and retaliation, milk futures showed a brighter outlook. But they dropped right down again after the tariffs were announced.”
The tariffs have a direct impact on New Mexico exports, which reached $13.6 million in cheese and whey-cheese curd sales to Mexico last year, plus $6.3 million in whey, modified whey and some cheese products sent to China, according to the U.S. Chamber of Commerce and U.S. Census Bureau.
But the biggest impact is from world price volatility, which directly affects what local producers earn for their milk and other products, said Robert Hagevoort, a dairy specialist with New Mexico State University’s Cooperative Extension Service.
“We’re in a globalized market and everything affects prices now, whether its a drought in Brazil, rain in New Zealand, price swings in South Africa, or market competition from European producers,” Hagevoort said. “We’re subject to all the ups and downs on international markets.”
Some relief may be coming from the newly renegotiated North American Free Trade Agreement among the U.S., Mexico and Canada. The three trade partners hammered out some significant modifications to the 20-year-old pact, including a concession by Canada to open its domestic dairy market a bit more to U.S. producers, while also ratcheting down exports of one class of milk it’s been dumping on world markets since 2017.
The agreements must still be ratified by legislators in all three countries.
Mexico’s tariff on cheese remains unchanged, because that was not a part of the NAFTA renegotiations. But the prospect of NAFTA remaining in place after more than a year of uncertainty during negotiations is good news for the U.S. dairy industry, since dairy products account for one-fourth of all U.S. exports to Mexico, Vitaliano said.