Throughout the United States, the price of milk will soon be reduced by $0.22/cwt to $1.29/cwt because of the ongoing tariff war. While American consumers celebrate the few dimes they can tuck back into their wallets, reduced prices reflect struggling farms nationwide.
The international blowback from recent tariffs implemented by the Trump administration will have substantial destructive effects on the American dairy and agricultural industries, Chuck Nicholson, associate professor of agriculture and economics at the University of Wisconsin-Madison, told The Daily Cardinal.
Nicholson predicts the net income of all U.S. dairy farms will be reduced by $1.6-$7.3 billion in the next four years, with individual farms seeing an income reduction of 25% or more. The average annual value of all U.S. dairy product exports during the next four years is predicted to reduce by nearly $5 billion, or up to half of its current value. The United States currently exports around 17% of the dairy products it produces, according to the Department of Agriculture.
In Wisconsin, the economic fallout will be significant.
Wisconsin plays a significant role in the dairy industry. The state is home to around 5,300 dairy farms — more than any other state in the country — which contribute over $52.8 billion annually to the state economy.
Many countries have already placed significant retaliatory tariffs on the United States, including Mexico, Canada and China. As these retaliatory tariffs make it more costly to buy dairy and agricultural products from the United States, fewer products will be exported. As less milk is exported out of the country, businesses will lower domestic prices to curb the sudden inventory surplus.
“Fewer sales made outside the United States means there are more products available here,” Nicholson said. “It costs companies to keep that inventory, so they have to lower domestic prices.”
But any slight benefit an American consumer may notice in this cost reduction is “not nearly as noticeable as the predicted drop in dairy farm income,” he added. This decrease in income is expected to worsen as other countries find new suppliers of agricultural and dairy products.
Foreign buyers are concerned about not only the rising costs of exporting agricultural and dairy products, but also the rapid rate at which tariff policies are changing. Nicholson said the uncertainty around what tariffs are implemented at any given moment significantly disrupts the established trust between the United States and its foreign buyers, encouraging global buyers to purchase from alternate sources.
Although the sale of exports may temporarily increase, Nicholson explained, this is only occurring as global buyers rush to purchase goods before permanent tariffs are set. He said there will be a significant decrease in export sales long-term.
The longer the Trump administration’s tariffs are in place, Nicholson said, the less likely it becomes that the United States can recover its previous trading relationships and export sales.
As tariffs continue to change daily, Nicholson said farmers and agricultural companies in Wisconsin and throughout the nation do not want to commit to large decisions regarding their businesses.
“They don’t know if they should buy these supplies or continue to build that new plant,” he said.
The Trump administration is also considering a reduction in funding for food assistance programs throughout the nation, which rely on large dairy suppliers like Wisconsin. As these programs purchase fewer dairy products, Nicholson said dairy farm income would be further reduced.
To offset this strain of reduced income, the Trump administration is considering giving farmers compensatory payments, an action also taken during the first Trump administration.
While such payments may help in the short term, “there is no scenario in which you can pay enough to fully compensate for the loss due to these [tariffs],” Nicholson said.
