Mexico has been trying to grow its dairy industry for years, with mediocre success. But the threat of 30% tariffs on top of a 10% base tariff appears to be the impetus the country needs to pick up its effort. That’s bad news for the U.S. dairy industry because Mexico is the largest foreign purchaser of U.S. dairy products, according to Sarina Sharp, analyst with the Daily Dairy Report.
“Mexico accounted for more than half of U.S. milk powder exports and more than one-third of U.S. cheese exports in 2023 and 2024. In each of the past three years, Mexico consumed more U.S. milk powder than the United States used domestically,” Sharp noted.
Amid uncertain trade relationships and food inflation, Mexico recently announced plans to spend $4.1 billion over the next five years to boost domestic milk production 13% by 2030. The country’s Ministry of Agriculture and Rural Development hopes domestic milk production growth will replace 30% of milk powder imports.
The ministry announced it will provide small- and medium-sized operations—97% of all operations—with subsidies, technical assistance, and infrastructure upgrades. Funding will also be provided to reopen and modernize dairy processing facilities. These new programs will be launched alongside the new Leche para el Bienestar, or Milk for Wellbeing, initiative. In this initiative, which is expected to benefit 7 million consumers this year alone, the government will directly purchase milk from producers in the poorest states and resell it to low-income consumers at a fixed price.
“Mexico will surely face some potholes on the road to self-sufficiency,” Sharp said. “Many nations, including the United States, have attempted to prop up small farming operations, but they’ve failed to forestall consolidation. In addition, Mexican processors will have difficulty competing on quality and cost by restoring manufacturing facilities that were mothballed decades ago.”
Even without government help, Sharp noted that Mexico’s dairy industry was expected to expand. According to a recent USDA Global Agricultural Information Network report, milk production in Mexico is expected to grow 1% this year compared to 2024 due to drought relief, less expensive feedstuffs, an expanding milk-cow herd, and continued consolidation. Since the report was published in May, Sharp added that drought conditions have improved and feed costs have continued to drop, indicating that growth in milk output could be even stronger.
“Even if Mexico’s milk production ambitions fall short, the focus on growth could have a significant impact on the U.S. dairy industry,” Sharp said. “For decades, a favorable trading relationship has cultivated a vital outlet for U.S. dairy output. But today, the relationship has started to sour, and the Mexican government is looking to replace American dairy with homegrown products.”
