Analysis Milk
Deal with US looks favorable for European butter market
The trade deal between the United States and the European Union has been met with a flood of negative reactions, but the dairy sector has largely responded positively. The damage could have been worse without a deal than the 15% tariff initially imposed.
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The United States isn't a major market for European dairy products, but the situation for butter specifically is more nuanced. A significant portion of Irish butter is shipped across the Atlantic. Of the 2024 tons exported in 246.000, almost a quarter (65.000 tons) went to the US. Of this, Ireland accounted for 55.000 tons. This means that approximately 20% of Irish production goes to the US, making it a substantial market. The Kerrygold brand, in particular, is popular with American consumers.
Of Europe's total butter production, only slightly more than 10% is traded outside the EU. On balance, the export interest in the US market is therefore quite limited. Nevertheless, the tariffs could influence sentiment in the European market. If the US were to import significantly less Irish butter, those volumes would have to be "dumped" elsewhere, likely creating a competitive market in Europe.
More favorable than the current situation
This scenario, however, is unlikely. Irish Agriculture Minister Martin Heydon has indicated his satisfaction with the deal, specifically for butter exports. He calculates that the agreed-upon tariff of up to 15% is more favorable than the current situation. Since April, Irish butter exports have been subject to an additional 10% tariff on top of the existing 16% levy. Without a trade deal, the tariffs would likely have risen to 30%.
The Minister of Agriculture is also hopeful that Irish butter might be completely exempt from tariffs. He refers to the potential zero-tariff system for certain products. Whether this will also apply to European butter (or dairy products in general) remains unclear. The deal has been agreed in principle, with the details to be finalized in the coming months.
During President Trump's first term, he already imposed tariffs on European goods, including dairy. He also threatened tariffs on Dutch Gouda and Edam cheese, but these products were later exempted. The precise reason for this is unclear.