Why are the US dairy producers so worried about the Trump administration’s tariffs?
- by admin
A few months ago, I spoke to a dairy producer from New Zealand.
He told me the US government was moving in the opposite direction.
“I think it’s just a very big mistake to think the US is going to get tariff-free access to our markets.
It’s a very dangerous path to take,” he said.
“We have been here since the 70s and 80s and we’ve had access to the US market for decades, and they’ve moved into the US markets over the last 10 years.
So they have a lot of leverage on our market and they have taken advantage of that leverage.”
So what’s going on?
What is going on in the US?
In 2017, the Trump Administration launched a new, new era of trade protectionism, called “free trade”.
It’s the same approach that was used by George W Bush’s administration.
In 2017, it was the US that began the “golden decade” of trade liberalisation.
The US had previously been a free trade country.
But in the ’90s, it started taking steps to make its markets more competitive by subsidising dairy imports from other countries.
It became more aggressive in protecting its dairy industry, even after it lost the World Cup.
By 2020, the US was on track to overtake Canada as the biggest dairy exporter in the world, and it was one of the largest exporters of beef.
But it didn’t go into free trade.
The US dairy sector is now more reliant on subsidies than ever before, and in some cases, it’s even more reliant than ever on subsidies to make it possible to sell its products.
A lot of the money goes to subsidising other countries, says Ian McElroy, professor of economics at the University of Sydney and a former US trade negotiator.
This is why the US has an extremely small number of farmers, he says.
McElroy says the current administration’s approach to trade is “just not sustainable”.
“It’s going to have a big impact on our farmers, but it’s going’t have an impact on the dairy industry,” he says, pointing out that the US Dairy Export Promotion Authority (DEPA) has spent more than $1 billion since the Trump-era tariffs were implemented on dairy products from Mexico, Canada, and India.
Depeche Mode are now the biggest exporter of dairy in the country, but the US hasn’t been able to negotiate a good price for its dairy exports.
Since Trump’s election, dairy exports from the US have slumped, and the US milk export market is down by more than a third.
There is a lot more room for improvement, says McElroys professor.
While the US might be moving towards free trade, it has been trying to make some progress.
But the US needs to make the most of its new leverage, and that means increasing its dairy market share, says Andrew McNeill, an economist at the Centre for International Governance Innovation (CIIG).
“The US is not going to be able to do much better if we are not in free trade,” he tells me.
If we want to export more milk and produce more milk than we currently do, the dairy sector needs to diversify, he argues.
But for a US dairy farmer like Iain, this means the US could be exporting more milk in the future.
What do the new tariffs mean for dairy farmers in the U.S.?
According to McElrry, the new US tariffs mean that farmers who have already exported milk to the U: the US, Canada and Mexico will pay a greater share of the tariff.
Accordingly, dairy farmers will see a smaller percentage of their income going to tariffs, and more of their revenue going to taxes.
And the US farmers who are now on the hook for paying tariffs will have to pay more for their products.
These are not good times to be a dairy farmer in the United States, and farmers like I am can only hope that the Trump and Bannon administrations are not too optimistic about their future.
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