China’s 21.9-42.7% Tariffs on EU Dairy Products: Industry and Global Trade Implications

This analysis is based on the CNBC report [1] detailing China’s tariff imposition on EU dairy products. The tariffs stem from an anti-subsidy investigation launched in August 2024, which concluded that EU subsidies (under the Common Agricultural Policy) distorted market prices and harmed China’s domestic dairy industry [5]. China’s domestic sector faces significant challenges: 24 months of declining farmgate milk prices, oversupply, high inventories, and weak consumer demand amid economic headwinds (real estate crisis, youth unemployment, deflation) [6]. The EU is China’s second-largest dairy supplier (behind New Zealand), with China importing $589 million of affected products in 2024 [2]. The tariff scope includes fresh/processed cheese, blue cheese, and milk/cream with >10% fat content [5].

1. Escalating Trade Tensions
   : This tariff is the latest retaliatory measure between China and the EU (following EU EV tariffs and China’s brandy tariffs), reflecting broadening trade frictions beyond specific industries [4][5].
2. Targeted EU Exporter Impact
   : Major firms like Arla Foods (28.6-29.7% tariffs) and FrieslandCampina’s Belgian/Netherlands operations (42.7% tariff) face disproportionate costs, risking market share in premium segments (e.g., French Roquefort) [2].
3. Global Trade Shifts
   : New Zealand (China’s top dairy supplier) is poised to increase exports, while Australia may also benefit. U.S. exporters remain constrained by existing tariff issues [3][6].
4. Domestic Industry Limitations
   : While tariffs aim to protect domestic firms, weak consumer demand and oversupply may limit long-term profitability improvements [6].

• Further Retaliation
  : The EU may impose additional tariffs on Chinese goods, escalating tensions [4].
• EU Market Diversification
  : EU exporters could shift focus to Southeast Asia, potentially oversaturating those markets [2].
• Domestic Demand Constraints
  : China’s economic slowdown may continue suppressing dairy consumption, reducing the tariff’s effectiveness [6].

• Alternative Supplier Gains
  : Non-EU suppliers like New Zealand and Australia could capture increased market share in China [3][6].
• Domestic Price Stabilization
  : Reduced import competition may allow domestic firms to stabilize prices and clear inventories short-term [3].

• China imposed 21.9-42.7% provisional tariffs on EU dairy products effective December 23, 2025 [1][5].
• The EU is China’s second-largest dairy supplier, with $589 million in affected 2024 imports [2][3].
• Major EU exporters face targeted tariff rates, risking premium segment market share [2].
• Global trade will likely shift to New Zealand and other non-EU suppliers [3][6].
• China’s domestic dairy industry faces underlying challenges (oversupply, weak demand) that tariffs may not fully address [6].