The EU’s recent announcement that it will increase tariffs on Chinese electric vehicles has led to a counterreaction. With the EU tariffs set to rise significantly, China’s Ministry of Commerce has launched an investigation into EU dairy subsidies that could have far-reaching consequences for European exports. The targeted products, including liquid cream and various cheeses, represent a significant trade value of USD 572.5 million as of 2023.
While the current probe does not encompass the highest-volume categories such as whey-derived products and milk powders, there is concern within the industry that China may broaden its investigation. The probe, expected to run through most of 2025, leaves the door open for potential market impacts by 2026. France, as a major exporter, could be significantly affected, given its 37% share in the targeted product exports. Meanwhile, some dairy industry participants are concerned that China could expand the scope of investigation-targeted products.
Said Mary Keough Ledman, Global Strategist – Dairy, RaboResearch: “As the investigation unfolds, non-EU dairy exporters like Australia, New Zealand, the UK, and the US are poised to capitalize on any resulting trade shifts. With China still heavily reliant on imports for over half of its needs in the targeted categories, these countries could see an increase in market share should additional tariffs come into play.”
China’s domestic dairy industry is currently experiencing overproduction relative to demand. This has prompted a strategic shift toward value-added dairy products to better utilise the surplus and potentially reduce reliance on imports. The ongoing trade tensions with the EU may inadvertently accelerate this transition, offering a silver lining for local Chinese dairy producers and exporters from other nations. For more visit Rabobank.com
