U.S. Unlikely to Capitalize on Dairy Demand Growth in China

President Donald Trump’s trade war with China ramped up this week, with both Trump and China President Xi Jinping refusing to yield. Trump and Xi appeared to be willing to climb the tariff ladder together, with no ceiling in sight, but then Xi announced Friday, after raising tariffs again, that they were as high as they would get. He made it clear, though, that he wasn’t backing down and that tariffs were already high enough to make U.S. products unmarketable in his country. Chinese importers of most U.S. goods will be required to pay a 125% tariff, while U.S. importers of most Chinese goods will be stuck with 145% duties.

The escalation of the trade war will basically lock the U.S. dairy industry out of the Chinese market for now, just when demand for dairy is expected to increase and milk production continues to fall, said Betty Berning, analyst with the Daily Dairy Report. China is the U.S. dairy industry’s third largest market by value, accounting for 7% of total dairy exports last year.

In February, milk production in China fell for the seventh straight month. CN Agri data showed that milk collections were 6.1 billion pounds in both January and February, with year-to-date output down 9.2%, compared to January and February 2024. Despite falling milk production, milk prices in China also fell, down 15 % in February relative to February 2024, according to RaboResearch. And skim milk powder production in January and February plummeted more than 30% compared to the same months in 2024.

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