Trans-Atlantic Turmoil with Trump’s Tariffs and Trade Wars

Last week was anything but bullish for dairy prices. The downward pressure began with cream, dragging the butter market down with it—losing nearly €250 per metric ton over the course of the week before clawing back some ground by Friday’s close. The cheese market remains tight, but the weaker sentiment in fats is already casting a shadow over expectations for the months ahead. Meanwhile, the SMP market continues to send mixed signals. However, after speaking with key players, it's safe to say that rising prices aren’t exactly on the horizon. The outlook for EU dairy prices may not be as bright as it seemed on January 1st—and if anything, more storm clouds appear to be gathering. Given the EU dairy market’s deep ties to international trade, any disruption on the global stage has the potential to send ripples (or waves) through pricing. And with a new president now settling into the White House, one can’t help but wonder—how long before the balance of trade is put to the test?

The world had almost managed to survive two full weeks of a Trump presidency without any new tariffs—quite the accomplishment, considering his well-documented fondness for them. But just as markets started to breathe a little easier, the weekend brought a fresh dose of tariff-fueled chaos. Last weekend, Trump declared victory after successfully pressuring the Colombian government into accepting deportation flights of migrants by threatening an emergency 25% tariff on all Colombian imports. This weekend, however, he raised the stakes, slapping tariffs on Canada, Mexico, and China—officially launching what can only be described as a trade war.

It didn’t take long for the backlash to roll in. The Mexican President swiftly announced retaliatory tariffs, while Canadian Prime Minister Justin Trudeau promised “far-reaching” countermeasures. Meanwhile, China’s commerce ministry stated it would file a complaint with the World Trade Organization and would “take corresponding countermeasures” (without going into the kind of dramatic detail we’ve come to expect in trade spats of this scale). And so, the inevitable question looms—when will the EU find itself in Trump’s crosshairs? If his comments on Friday are anything to go by, it might be sooner rather than later. When asked whether he planned to impose tariffs on the European Union, he responded with his trademark mix of bravado and showmanship: “Am I going to impose tariffs on the European Union? Do you want the truthful answer, or should I give you a political answer? Absolutely. Absolutely.”

Now, the real question for us isn’t whether international trade will take a hit—that much is a given. What really matters is: how will these tariffs impact European dairy prices? Because when the dust settles, that’s the number that will dictate how this trade war plays out in our world. The U.S. is a top-five importer for many of our dairy exports, and when it comes to butter and most cheeses, it holds the number two spot—right behind the UK. That makes the potential impact of U.S. trade policy on the European dairy market impossible to ignore. The real challenge with Mr. Trump’s tariffs isn’t just their scale—it’s the speed at which they take effect. Unlike traditional trade disputes that unfold over months of negotiations, Trump’s tariffs can hit within days, leaving markets scrambling to adjust. This uncertainty alone is enough to disrupt current trade flows, r egardless of whether tariffs ultimately materialize. One thing does seem certain: in a market already grappling with weakened exports to historically reliable partners and demand concerns at today’s so-called ‘high’ price levels, this new transatlantic tariff turbulence is unlikely to bring anything but further downward pressure on EU dairy commodity prices.

GDT: Cant it set a direction

This week brings another GDT trading event, and once again, the market is looking for direction—or at the very least, some clarity. But will it get it? We’re not convinced. Our forecast leans towards stability, with only minor fluctuations—either slightly up or down—compared to the previous event.

Our outlook by product:

🧈 Butter: EU butter prices are likely to take a heavy hit, continuing the downward trend of recent weeks. Over in New Zealand, butter and AMF could see more stability, but a weak EU market sentiment may still apply some downward pressure.

🧀 Cheese: Our forecast remains stable to slightly bearish, particularly for Mozzarella, as uncertainty lingers.

💨 SMP: We wouldn’t be surprised to see EU SMP push slightly higher, but let’s not get ahead of ourselves—there’s no major upward momentum in sight. Expect prices to trade between €2,450 and €2,500.

🌍 WMP: A tougher one to predict, but futures markets suggest a move towards higher prices.

With so many mixed signals, the real takeaway is this: don’t expect this GDT to be the game-changer the market is searching for.

Focussing on EU dynamics

Even without the added complexity of trade wars, tariffs, or GDT movements, there are enough shifting dynamics at play to keep the EU dairy market on edge.

Seasonal milk volumes are starting to rise, and several countries are signaling a recovery in both volume and composition. This increase in supply was particularly evident last week in the spot market for liquids. While SMC prices held relatively steady—though they were already trading on the lower end—spot milk prices continued to decline. In Germany, prices have now fallen further below 50 cents, widening the gap between spot and contract milk prices.

This raises an important question: where is all the milk going? Data sent to us by some of our partners indicate that German milk intake is down by 1.5 percent. At first glance, this might be considered bullish, as lower milk supply typically leads to reduced commodity production. However, production data tells a different story. Germany has managed to produce 14% more butter, 28% more SMP, and even 1% more cheese compared to the previous year. Year-to-date figures show that butter production is up by 9%, SMP production by 18%, while cheese remains tighter with a 3% decline in output.

This raises another question—what has Germany produced less of? A quick check-in with market partners did not yield a clear answer, but a reduction in UHT milk and consumer retail products such as yoghurts and drinking milk seems like the most plausible explanation.

It remains to be seen whether Germany’s production trends reflect broader EU dynamics. If they do, the butter stock deficit may resolve itself much sooner than expected, while SMP prices could remain under pressure for a longer period. As for cheese, if production normalizes to last year’s levels, the tightness in the market may begin to ease in the coming weeks. For now, the market continues to seek clarity, but the latest production data suggests that some previous assumptions may need to be reconsidered.

Butter: Feeling Pressure

The butter market feels undeniably heavy. With weaker demand for cream, end users sitting on relatively comfortable coverage, and producers finally willing to sell some January production, the pressure is building. Cream prices dropped to € 8000 levels by the end of the week, suggesting butter production below € 7000 is still profitable. If more producers decide to step in and sell, we could very well see the market take another step downward. If they hold back, however, the demand for cream could weaken further, putting even more strain on spot prices.

Are we entirely bearish? Not quite. There’s a level where buyers will inevitably re-enter the market, and we believe that threshold sits around €6,800. A significant portion of the market has recalibrated its cost price between €6,800 and €7,000, meaning buyers will start securing portions of their annual needs at these levels. That being said, once pressure starts to build, these same buyers will likely push the limits of price discovery, looking to secure even lower prices. After spending much of the end of last year paying €1,000 to €2,000 above their budgets, it seems they’re more than happy to return the favor to sellers.

Last week, significant Q2 volumes traded between €6,850 and €6,950, while some Q3 volumes were locked in at €7,010 for NL/DE/BE. As we start the new week, we expect to see both buyers and sellers anchoring their price expectations around these levels—at least for now. We expect to have the following

• Spot buyers (Feb/March) for NL/DE/BE around € 7050 and sellers around € 7150
• Spot buyers Polish lactic around € 6900 FCA Poland
• Q2 buyers for NL/DE/BE  around € 6900 and sellers around € 7000
• Q3 buyers of NL/DE/BE around € 7000 and sellers around € 7050

Cheese: Sentiment Sliding

The cheese market doesn’t feel bearish. In fact, for specific nearby products, some might even argue it leans bullish. However, the further out you look, the less firm the market appears. Gouda for prompt loading? Sellers are holding between €4,300 and €4,350. Move out to March, and prices soften slightly to €4,250–€4,300. By Q2, sellers seem more open to considering deals around €4,250. Mozzarella, on the other hand, presents a flatter pricing curve, with sellers still aiming for €4,050 from February through June, while buyers remain hopeful for something that starts with a three.