How Trump’s Trade War Could Hurt American Cheese Producers
While Donald Trump was campaigning for president, two issues he often repeated were taking a protectionist “America first” stance on trade and, somewhat similarly, exploiting people's distrust of Mexico. Since taking office, he’s continued to push these talking points. But this double whammy of escalating a trade war while also turning away from Mexico could have significant negative ramifications for an American industry you might not expect: cheese producers.
While we may like to imagine that American cheese exports are being sent to renowned cheese-producing countries like France and Italy to be added to some international cheese plate, according to a recent New York Times piece, a whopping 25 percent of all American cheese sold abroad is sent across our southern border, making Mexico the top destination for exported American cheese.
For this reason, an increased tariff on American cheeses being sold to Mexico will have immediate ramifications. Now at 15 percent, the tariff is set to rise to 25 percent on July 5 as a retaliatory measure against Trump’s steel and aluminum tariffs. The Times spoke to at least one producer in Wisconsin who said he’s already seeing some Mexican companies he supplies shifting to less expensive European competitors.
However, the long-term ramification of a Mexican cheese market pivoting to Europe and other countries is something many pundits have warned about all along: By tearing down trade agreements instead of trying to build them up, the Trump administration may be facilitating other countries’ ability to lead the trade discussion. One potentially overlooked effect of giving Europe the lead on negotiating trade is that the EU can protect its interests in ways that aren’t strictly financial.
For instance, in recent trade deals with Japan and Canada, the EU extended European “geographic indication” protections for cheeses like parmesan and asiago into these new agreements, meaning that as part of the deal, any cheese sold with these names has to come from that European region. As a result, despite the brand’s Italian heritage, the Wisconsin-based Sartori Company could no longer call its asiago cheese “asiago” in some markets, being forced to call it “Sartiago” instead. “The consumer doesn’t know what this is,” Jeff Schwager, Sartori’s president, told the Times. “We can’t even put ‘used to be called asiago’ on the label.”
The EU is expected to make a similar agreement with Mexico which could further box out American imports. Jaime Castaneda, senior vice president of trade policy at the US Dairy Export Council, pointed out the irony in these kinds of protectionist changes. “The Italians did not build the markets here for their cheese,” he explained. “We built the markets for Italian cheeses in Mexico.” Of course, in one sense, if you abandon a house, you can’t necessarily blame someone else for moving into it. In Mexico’s American cheese market, the US appears to be creating a void that others are happy to fill.