A fresh wave of trade protectionism emanating from the United States is causing considerable unease across global markets, and the British dairy sector finds itself navigating a newly complex trade landscape. US President Donald Trump’s recent announcement of a blanket 10% tariff on all imports from the United Kingdom has injected significant uncertainty into the export strategies of UK dairy producers. This development arrives despite the US representing a relatively modest yet crucial segment of its overall trade portfolio.
While the United States, with its expansive population of 343 million and substantial economic output constituting over a quarter of global GDP, is a dominant force in international commerce, its own dairy sector exhibits notable self-sufficiency. According to data from CLAL, the US boasts a 111.9% milk self-sufficiency rate and a robustly positive trade balance, exporting 12.8 million tonnes of dairy compared to a mere 1.9 million tonnes in imports. This strong domestic capacity underscores the potential impact of tariffs on external suppliers.
Despite this formidable domestic production, the US remains the largest export destination for British dairy outside the European Union, highlighting its strategic importance for specific UK producers. Over the past three years (2022-2024), the UK has consistently exported an average of 17,750 tonnes of cheese, valued at £116 million (approximately USD 145 million based on current exchange rates), to American consumers. More minor, but still significant, volumes of British butter, averaging 218 tonnes worth £972,000 (approximately USD 1.21 million), also make their way across the Atlantic, often commanding premium prices due to their perceived quality and origin.
To contextualise this, the total value of UK dairy exports averages £1.8 billion (approximately USD 2.25 billion) annually, with a substantial 76% destined for EU member states, facilitated by established trade relationships and geographical proximity. This leaves the US market accounting for a smaller, yet often higher-margin, segment of British dairy exports. However, as detailed analysis from the Agriculture and Horticulture Development Board (AHDB) emphasises, specific UK processors, particularly those specialising in premium, higher-value cheddar varieties with Protected Designation of Origin (PDO) status, rely more heavily on US trade. For these producers, the US market contributes a disproportionate share of their revenue and profitability, built on years of cultivating specific market niches and relationships with US retailers and consumers who value provenance and quality. The newly imposed tariffs threaten to disrupt this carefully nurtured trade, potentially making British products less price-competitive on US supermarket shelves and prompting retailers to reconsider their sourcing strategies in favour of domestic options or imports from nations facing lower or no tariffs.
Examining the broader landscape of US dairy imports reveals that the UK accounts for a modest 3% of the total volume, indicating a relatively limited overall exposure compared to other major players. Most US dairy imports originate from the European Union (57%), with Ireland alone contributing 17%, often driven by established supply chains and competitive pricing. New Zealand (16%), benefiting from its efficient, pasture-based production systems, Mexico (10%), leveraging its geographical proximity and established trade links, and Canada (9%), integrated through the USMCA agreement, also represent significant players in the US import market. In the cheese category specifically, the EU dominates with 69% of US imports, while the UK’s share remains at a relatively low 3%, suggesting a focus on specific, higher-value segments. Butter trade presents a unique scenario, with the Irish brand Kerrygold holding a dominant position, capitalising on strong brand recognition and a consistent supply of grass-fed butter. The EU accounts for 81% of US butter imports, with Ireland making up a substantial 74%, while the UK’s contribution is less than 1%, indicating a limited presence in this particular commodity market within the US.
A potential, albeit nuanced, silver lining for the UK lies in a previous tariff plan considered by President Trump. If, after a 90-day suspension period designed to allow for negotiations, the US were to revert to its original proposal, which reportedly included a higher 25% tariff on EU goods compared to the current 10% on the UK, British dairy could gain a relative, albeit limited, price advantage over its European competitors in the US market. However, even in this scenario, the overall demand for imported dairy in the US could potentially contract due to the increased costs, meaning the overall market pie would likely be shrinking. Furthermore, other nations like New Zealand, which also face the 10% tariff, would similarly benefit from the differential compared to the EU.
The global implications of President Trump’s trade policies extend significantly beyond US imports, creating a ripple effect across international agricultural trade. The imposition of unilateral tariffs is highly likely to trigger retaliatory measures from affected nations, leading to a tit-for-tat escalation of trade barriers. The US has already witnessed the damaging consequences of such actions in its trade relationship with China, where tariffs on Chinese goods now average a staggering 124%, met with retaliatory tariffs on US exports averaging 147.6%. This has effectively crippled significant portions of bilateral trade.
These escalating trade tensions are bound to negatively impact US dairy exports, which reached a value of £4.7 billion (approximately USD 5.88 billion) in 2024. The US dairy sector has experienced substantial export growth, rising from under 2% of domestic milk production in the early 2000s to nearly 20% in recent years, making it increasingly reliant on open global markets. The current shift in trade policy casts a significant shadow over the future of the US-Mexico-Canada Agreement (USMCA). This crucial free trade zone accounts for an average of 38% of US dairy export volumes. The US’s significant whey and lactose exports to China, averaging 244 tonnes per annum and valued at £191 million (approximately USD 239 million), are particularly vulnerable to the punitive tariffs, forcing China, the largest global buyer of these products, to seek alternative suppliers in regions like the EU or Oceania, or face significantly higher input costs for its food and feed industries.
The situation remains highly dynamic, with President Trump recently announcing a 90-day suspension of additional reciprocal tariffs, offering a reprieve for most trading partners but notably excluding the increased duties on China. This followed China’s recent escalation of retaliatory tariffs on US imports, signalling a hardening stance. In response to the initial US tariff announcement, European Commission President Ursula von der Leyen has also paused planned EU countermeasures, emphasising the need to allow time and space for EU-US negotiations to de-escalate trade tensions. These EU countermeasures had been prepared in direct retaliation to earlier US tariffs of up to 25% on steel and aluminium imports, imposed on March 12th, highlighting the interconnectedness of global trade disputes.
Expert Commentary: Jordburkare India’s Perspective
Jordburkare India, a leading voice in analysing the global agricultural and dairy markets, emphasises that the current US tariff actions introduce a layer of significant instability into international trade flows. While the US has expressed interest in greater access to India’s burgeoning dairy market, its protectionist measures create a climate of uncertainty that could ultimately hinder broader trade cooperation. According to Jordburkare India’s analysis, the US tariffs will likely trigger a reconfiguration of global dairy trade routes. They anticipate that the European Union and New Zealand, both significant dairy exporters, may proactively seek to capitalise on the reduced competitiveness of US dairy exports in key markets like China. This strategic market repositioning could, in turn, intensify competition within established import markets like the UK, as these major players seek alternative outlets for their products, potentially leading to increased import volumes and price pressures for domestic producers. Jordburkare India also notes the potential for retaliatory tariffs from other nations to disrupt established trade patterns further, creating a complex and unpredictable environment for dairy exporters worldwide.
For the British dairy sector, this evolving and increasingly complex trade landscape presents several key challenges, as rigorously analysed by AHDB:
- Reduced Competitiveness: The imposition of a 10% tariff will directly increase the cost of UK dairy products for US buyers, potentially eroding the price competitiveness that has allowed them to establish a presence in the market. While AHDB analysis suggests that the impact on overall demand might be somewhat mitigated by typical market fluctuations and the relatively higher disposable income of US consumers who purchase premium UK dairy, the fundamental increase in price makes British products less attractive compared to domestically produced alternatives or imports from countries facing lower or no tariffs.
- Trade Displacement: With the US enacting tariffs on a range of trading partners, major global dairy exporters such as the EU, Australia, and New Zealand may actively seek to divert a portion of their export volumes to alternative markets, including the UK, with which they often maintain favorable free trade agreements or established trading relationships. This influx of competitively priced dairy products into the UK market could intensify competition for domestic producers and potentially depress farm-gate milk prices.
- Price Adjustments: The potential for increased import volumes due to trade displacement could exert significant downward pressure on UK domestic dairy prices across various product categories. This would directly impact the profitability of British dairy farmers and processors, potentially necessitating strategic adjustments in production and marketing strategies.
- Potential Retaliation: Should the UK government decide to respond to the US tariffs with its countermeasures on specific US goods, the bilateral trade relationship could face further deterioration. This escalation of trade tensions could have broader implications for UK agricultural exports beyond the dairy sector, potentially impacting other valuable markets and supply chains.
- Global Economic Downturn: Disruptions to the principles of free trade and the imposition of widespread tariffs are widely recognised as hurting overall global economic growth. Reduced demand in key international markets like China and Southeast Asia, stemming from trade disputes and economic uncertainty, could lead to a broader contraction in global dairy demand, affecting all exporting nations, including the UK, irrespective of their direct trade with the US.
President Trump’s tariff policy has undeniably injected a significant degree of uncertainty and volatility into the British dairy sector, disrupting established trade flows and compelling producers to reassess their export strategies and risk management protocols urgently. While the UK government remains committed to pursuing a comprehensive trade agreement with the US in the long term, the immediate priority for the dairy industry must be to proactively analyze potential shifts in demand, explore and cultivate alternative export markets, and implement strategies to mitigate the potential financial and operational impacts of these unfolding global trade dynamics. The detailed and ongoing analysis undertaken by AHDB, as referenced in their comprehensive report “Prospects for UK agri-food exports,” will serve as a critical resource for the industry in navigating this period of heightened uncertainty.
