The impact of Trump's tariff announcements on the British dairy sector

The recent series of announcements by US President Donald Trump regarding new tariffs on imports has sent ripples through global trade markets. Among the industries affected, the British dairy sector faces significant challenges as the USA imposes an additional 10% tariff on all UK imports. This article explores the current trade landscape between the UK and the US, the broader global dairy trade dynamics, and the potential implications for British dairy producers.

Current UK-US dairy trade

The United States is an important export destination, with a population of 343 million, and with its GDP making up more than one quarter of global GDP. It is a large dairy producer, and is 111.9% self-sufficient in milk according to CLAL, with a strongly positive trade balance (exporting 12.8 Mt compared to imports of only 1.9 Mt). Despite this, it is the largest export market for UK dairy outside Europe, with cheese exports to the US totalling 17,750 t with a value of £116 million on a 3-year average basis (2022–2024). The UK also sends a smaller quantity of butter (218 t valued at £972,000).

To put that into context, the total average value of UK dairy exports reached £1.8 billion, with 76% of exports going to the EU. The remainder is distributed among other global markets, including the US, meaning that the US represents only a small proportion of British dairy exports. However, some processors are more exposed to this trade than others. Some higher value cheddar makers rely on US trade for a significant portion of their revenue, bringing in a disproportionate share of profits. While the US market has shown steady growth, the newly imposed tariffs threaten to disrupt this upward trajectory.

Tariffs will make British products more expensive on US supermarket shelves and could cause US retailers to change their sourcing decisions putting UK exports at risk. 

Other nations trade to the US

Of other nations trade to the US, 57% of total dairy imports (based on average of 2022 to 2024) comes from the EU (with Ireland making up 17% of that alone), 16% comes from New Zealand, 10% from Mexico, 9% from Canada and other nations making up a small proportion. To contextualise, UK dairy imports make up only 3% of US dairy imports. On the face of it, that means that the UK has much less to lose than some other countries. 

Of cheese specifically, the EU makes up 69% (with Ireland making up 5%), Canada 4%, Mexico 4% and New Zealand only 1%. Butter is a special case, with the Irish brand Kerrygold being a dominant player in the US market. There the EU makes up 81% of imports, with Ireland specifically making up 74%. New Zealand makes up 15% and other nations make up very little, with less than 1% from the UK. 

If, after 90 days, Trump reverts to the original tariff plan that imposed additional 25% of tariffs on the EU and only 10% on the UK, this may carry some advantage for UK-produced dairy. However, it would be a small slice over what would still be a shrinking pie.  In any case, in that scenario other nations such as New Zealand would also be at an advantage. 

US dairy trade to the rest of the world

Of course, a unilateral imposition of punitive tariffs globally was never likely to be received well and countries face the decision of whether to impose retaliatory tariffs on the US. President Trump has already made his opinions of retaliation clear and rapidly escalated tariffs on China meaning tariffs on goods from China are now 124% on average.  In return, China has imposed an average tariff on US exports to 147.6 %.

Such tariff arrangements will impact US dairy exports, the value of which amounted to £4.7 billion in 2024. The US dairy sector has experienced significant growth in global trade, with exports increasing from less than 2% of US milk production in the early 2000s to nearly 20% in recent years. In particular, the shift in trade policy raises questions about the future direction of the US, Mexico and Canada (USMCA) free trade arrangement, which accounts for an average of 38% of US dairy exports by volume. 

Certainly, Chinese–US trade is likely to be uneconomic. The lion’s share of US exports to China over the past 3 years has been in whey products and lactose. These account for an average of 244 t per annum and are worth £191 million to the balance sheet, which will need to be sourced from elsewhere or become significantly more expensive. The US exports more than 50% of its dry whey and lactose production, with China as the largest buyer.

Overview of Trump's tariffs

The situation has been dynamic to say the least. Last Wednesday, President Trump announced a 90-day suspension of all additional reciprocal tariffs, just hours after they had come into effect – except for China, where duties were increased from 104% to 145%. This escalation followed China’s earlier announcement of additional retaliatory tariffs on US imports which have since been raised to 125%. Such a high tariff will result in an immediate and sharp decline of all US dairy exports (mainly whey powders and lactose) to China. China has subsequently announced it will ignore any further tariff increases on the US side. 

All other countries affected by the reciprocal tariffs, including the EU, saw their duties revert to the universal reciprocal tariff rate of 10%.

In response to Trump’s announcement, President von der Leyen also decided to pause the EU’s planned countermeasures for 90 days, stating the need to “allow time and space for EU-US negotiations.” These EU countermeasures had been prepared in retaliation to US tariffs of up to 25% on steel and aluminium, imposed on 12 March.

Implications for the British dairy sector

The British dairy industry now faces several challenges:

1. Reduced Competitiveness – higher tariffs may make UK dairy products less attractive to US buyers. Whilst there is potential for this to lead to a decline in exports, it is likely any drop in demand would be limited. If all of the tariff increase is passed onto consumers, a 10% rise would be within the general fluctuations seen in commodity markets and exchange rates. Therefore, UK product should remain affordable to many of the generally more affluent consumers.
2. Trade Displacement – with the US imposing tariffs on multiple trading partners, dairy exporters such as EU, Australia, and New Zealand may seek alternative markets for some of their trade. This may lead to increased imports into the UK, given we have free trade agreements with these parties.
3. Price Adjustments – more displaced product on the UK market could produce downwards pressures on UK dairy prices.
4. Potential Retaliation – if the UK government responds with countermeasures, trade relations could further deteriorate, impacting dairy exports beyond the US market.
5. Global economic downturn – disruption to free-trade is rarely a positive and the markets have already expressed their displeasure. China and other South East Asian market could be impacted which would reduce dairy demand globally. We would also expect this to impact other markets globally, suppressing demand. 

Trump’s tariff policy introduces uncertainty into the British dairy sector, disrupting established trade flows and forcing producers to reassess their export strategies. While the UK remains committed to negotiating a trade deal with the US, the industry must prepare for potential shifts in demand and explore alternative markets to mitigate the impact of these tariffs.

AHDB have undertaken a detailed analysis of our export prospects into the USA and other markets as part of this study: Prospects for UK agri-food exports | AHDB

Sign up to receive the latest information from AHDB.