The latest developments in international trade have EU dairy producers treading in turbulent waters. The dynamics between China and the European Union (EU) have taken yet another retaliatory turn, triggering concerns for various industries, particularly the dairy market. This follows a series of retaliatory actions from Beijing in response to the European Union’s tariffs on Chinese electric vehicles (EVs) — a saga that has been unfolding since the EU’s anti-subsidy investigation into Chinese EVs in 2023.
The Trade Spat Heats Up
Imagine a chessboard, with China and the EU as the main players. The EU’s initial move was imposing tariffs on Chinese electric cars, but Beijing swiftly countered with tariffs on EU imports, starting with brandy and pork and now setting its eyes on dairy products. This tit-for-tat scenario is a classic example of a trade war where products, unfortunately, become pawns in larger political games.
The Impact on Dairy
China’s newly imposed tariffs make EU dairy products, such as cheese, substantially more costly for Chinese consumers. Consequently, these tariffs pose significant challenges for EU dairy exporters, with French cheese producers being particularly vulnerable to these economic changes. The shift could potentially divert Chinese buyers toward other dairy-exporting countries, such as New Zealand, due to the newfound competitive edge of their products.
Meanwhile, Chinese dairy companies, who are already faced with an overabundance of milk and reduced prices domestically, might find a silver lining. By making imported EU dairy less appealing due to heightened prices, these companies might experience relief from excessive competition.
Negotiations Continue
As China and the EU continue negotiations over the EV tariffs, core disagreements persist. Currently, the dairy tariffs are provisional, leaving room for possible adjustments based on the final decision expected around mid-February 2026.
According to Shawna Morris, executive vice president of trade policy and global affairs at the National Milk Producers Federation, if these tariffs on European cheeses stick, it could improve how competitive U.S. cheese exports are in China.
“The duties on EU products are simply provisional, though; they may be revised at the close of the investigation in mid-February 2026,” Morris says. “The biggest challenge for U.S. cheese exporters to China though remains the duty-free access enjoyed by New Zealand product due to its FTA with China.”
Matt Herrick, executive vice president and chief impact officer with the International Dairy Foods Association (IDFA), says the direct overlap between U.S. and EU dairy products shipped to China isn’t extensive. However, he emphasizes: “If there is a market opportunity created due to this action or any other bilateral actions taken by trading partners with our competitors, U.S. dairy exporters are ready and able to step into that space and be a reliable supplier of high-quality, competitively priced dairy.”
Herrick also highlights the critical need for U.S. dairy exporters to diversify their markets beyond China. Historically, China has been the third-largest export market for U.S. dairy, after Mexico and Canada, consistently accounting for 7% to 10% of annual U.S. dairy exports by value. However, China’s increasing drive for self-sufficiency means demand for imported dairy is expected to slacken, creating a direct competitive challenge for U.S. products.
To address this, the U.S. dairy industry is actively working to develop multiple new markets. Herrick points to collaborative efforts with the Trump administration that led to new framework deals and expresses enthusiasm for working with the USTR and the White House to explore opportunities in Southeast Asia, the Middle East, North Africa, Central America and South America. This strategic diversification aims to reduce the industry’s reliance on any single top market.
These points align with arguments effectively presented in this op-ed piece by Gregg Doud, president of the National Milk Producers Federation (NMPF), and Michael Dykes, CEO of IDFA.
Phil Plourd, president of Ever.Ag Insights, says at a high level, this all will make cheese from Europe more expensive in China.
“That’s not a bad thing from a U.S. perspective,” he says. “At the same time, I’m not convinced that the volumes in play would necessarily move the needle in a big way.”
In these uncertain and volatile times, the global dairy trade landscape is witnessing a realignment following the international maneuvers of economic chess. As the world awaits the outcome of ongoing negotiations, stakeholders from various sectors remain watchful, ready to adapt to the ever-shifting trade currents. For the EU dairy industry, the upcoming months will be pivotal in determining the consequences of these trade tensions and their broader impacts on global markets.
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