Trade Turbulence Could Shake Up Dairy Exports to China

The ongoing trade tensions between the United States and China have begun to significantly impact the dairy sector, particularly for products like dry whey, whey permeate, and lactose, where the U.S. stands as a leading global supplier. Rising tariffs have dampened the U.S.'s lucrative dairy exports, raising concerns that China might seek alternative suppliers to meet its demand. More than half of the U.S. production for dry whey and lactose is shipped overseas, with China being the largest purchaser.

Recent developments saw U.S. President Donald Trump announce a 34% tariff on Chinese imports, which subsequently increased to 84%. In retaliation, China placed a 34% tariff on U.S. products entering its market. These measures risk impacting U.S. lactose exports particularly hard; however, due to its lower pricing around $834 per metric ton compared to European averages, some U.S. lactose may remain competitive in certain segments despite these challenges.

The potential for shifts in this market due to international trade dynamics could open opportunities for Europe, Oceania, and South America to increase their footprint in the Chinese market. Although prospects exist, these are coupled with considerations of cost, product quality, and supply constraints.

Mary Ledman, global sector strategist for dairy at Rabobank, notes, "The intensifying trade conflict between these two major trading partners could lead to shifts in lactose and whey trade, with potential export opportunities for Europe, Oceania and South America." She further highlights that the U.S. market, and specifically dry whey and milk markets, may witness increased pressure due to expanding production capacities alongside trading conflicts.

The trade war adds a layer of complexity and uncertainty to the global dairy sector, signaling possible adjustments and realignments in international trade flows. As U.S. exporters brace for these changes, market dynamics continue to evolve rapidly.