On the heels of the first phase of the trade deal signed between U.S. President Donald Trump and Chinese Vice Premier Liu He this week, Michael Dykes, president and CEO of the International Dairy Foods Association, issued an upbeat statement: “The two most powerful economies in the world began to restore a positive, mutually beneficial trade relationship, and dairy producers and processors across the United States are grateful.”
For perspective, China represents a $23 billion market opportunity over the next decade for U.S. dairy farmers, and a level playing field is essential for the success of the relationship.
Phase one of the U.S.-China trade deal includes, in addition to purchases of U.S. agriculture products such as dairy, commitments from the Chinese to reduce non-tariff barriers on products such as infant formula and milk with an extended shelf-life.
“The dairy industry welcomes news of this deal and looks forward to beginning negotiations on phase two that must remove all existing tariffs and non-tariff barriers and create a level playing field for U.S. dairy products,” Dykes added. “IDFA is hopeful that this deal—alongside the recently implemented phase one Japan deal, as well as the U.S.-Mexico-Canada agreement—signals the United States has embraced a market- and rules-based system of international trade that is essential for the future of the U.S. dairy industry.”
He also noted that the United States is now the world’s third-largest dairy exporter, sending product to more than 140 countries.
Background on U.S.-China
The governments of China and the United States have imposed billions of dollars in retaliatory tariffs during the two-year trade dispute, which has put a drag on America’s dairy industry. U.S. dairy export value to China peaked in 2017 at $576 million, fell 13% to just over $499 million in 2018, and is $343 million through November of this year—a 26% drop over 2018. Until this year, China had become the leading market for U.S. whey and a growing customer for U.S. cheese. Retaliatory tariffs, however, have derailed that potential and cost the U.S. dairy industry millions in sales, market share and jobs.
China bought 33% of U.S. whey exports by value in 2018. Overall, shipments added up to $174 million. Year to date through November 2019, with retaliatory tariffs still in place, export value of U.S. whey exports totaled $101 million. That was down 38% from 2018 and 53% lower than pre-tariff 2017.
China is becoming a major market for cheese, with total imports up by 20% annually over the past five years. With U.S. product pricier due to higher tariffs, other sellers have been quick to fill in. Through November 2019, U.S. export value fell 34%. That’s on top of a 39% loss in the second half of 2018.