The Trump administration has implemented new tariffs to protect national security, such as those on imported aluminum and steel, and to rein in countries that it believes have taken unfair advantage in trade dealings, such as China and the European Union. These tariffs and retaliatory tactics from key trading partners have created uncertainty in the market, causing American dairy companies to lose significant market share and opportunities for future sales.
IDFA fully supports the current administration’s goal of seeking a level playing field for American companies, but tariffs punish U.S. dairy businesses and their employees along with the offending trade partners. IDFA believes rolling back the tariffs and moving swiftly to negotiate strong trade agreements is the best way to ensure fair competition and a market-principled approach to trade.
Section 232 of the Trade Expansion Act of 1962 allows the president to investigate and act on trade issues that could pose a national security threat. The administration determined in May 2018 that domestic production of aluminum and steel was insufficient for U.S. defense and national security, so President Trump imposed tariffs of 10% on aluminum imports and 25% on steel imports.
In July 2018, Mexico retaliated with a 25% tariff on U.S. cheese exports that severely restricted sales and strained business relationships. The Mexican market for U.S. cheese was close to $388 million in 2018, but the 25% hike in tariffs caused U.S. cheese exports to decline by 4% through December.
In May 2019, Canada, Mexico, and the United States reached an agreement that lifted the Section 232 tariffs and removed all retaliatory tariffs. The agreement also prohibits future retaliation if the United States reimposes the Section 232 tariffs.
The Trade Security Act, S. 365, would allow congressional oversight of U.S. tariff policy by reforming Section 232. It also would give the Department of Defense responsibility for investigating the national security threat to ensure that it was genuine. The Department of Commerce would oversee the remedy phase. IDFA has endorsed the proposed bill, along with its companion bill, H.R. 1008, in the House of Representatives.
IDFA continues to tell the administration and Congress that trade skirmishes with escalating tariffs are damaging to the U.S. dairy industry and its future growth. Establishing strong trade agreements with a wide variety of countries is the best way to enhance market access and create a level playing field.