Trump escalating China trade war could hurt US dairy
At home, there was concern over Trump’s dismantling of the North American Free Trade Agreement (NAFTA), and while it has since been replaced it with the US Mexico Canada Agreement (USMCA), that deal has stalled, and has yet to pass the Democrat-controlled Congress.
At this month's ADPI/ABI Annual Conference in Chicago, many speakers and representatives of the dairy community stressed how important it is that the USMCA be passed and take effect. They also spoke of the potential fallout from Trump's fight with China and how new tariffs could blow back on Americans.
Trump raised tariffs on $200bn worth of imported Chinese goods from 10% to 25% on May 10, despite reports that he would be re-negotiating trade with Chinese President Xi Jinping that week and potentially reaching a deal.
“I happen to think that tariffs for our country are very powerful. We’re the piggy bank that everybody steals from, including China. We’ve been paying China $500bn a year for many, many years. China rebuilt their country because of us,” Trump said at the White House.
China warned it was prepared to retaliate against any tariffs Trump imposed, and did respond with tariffs on $60bn of American products days later.
The dispute affects dairy ingredients, as most US production of lactose is exported to China, Japan, Mexico and New Zealand. The US exported a record amount in 2018, and lactose demand is expected to remain strong despite the tariffs and potential price fluctuations.
Gabriel Sevilla of Proliant Dairy Ingredients discussed the global permeate market at ADPI and its reliance on China. Exports of lactose, whey proteins and milk powders are also high to China, and could struggle during the trade trouble.
“In July, thanks to the trade war, tariffs for permeate increased from 2% to 27%. So many of our Chinese customers were concerned, not only of lower permeate demand but also [that] they might be left with very high priced inventories once the trade war was over,” he said.
