The dairy industry could lose billions of dollars if President Donald Trump imposes tariffs on products from China, Canada and Mexico, and begins a mass deportation of undocumented immigrants, a dairy economist said at a conference at Cornell last week.
The combination of the tariffs, deportations and a potential reduction in food and nutrition spending would result in a $6 billion loss in profits to U.S. dairy farmers over the next four years, said Charles Nicholson, M.S. ’90, Ph.D. ’96, an adjunct associate professor in the School of Integrative Plant Science in the College of Agriculture and Life Sciences.
“If you pick a trade fight with our major export destinations – Mexico, Canada and China – and they decide to retaliate, that has some substantive negative implications for dairy farms and processors,” Nicholson said at the 2025 Dyson Agricultural and Food Business Outlook conference, held Jan. 17 in Stocking Hall.
The conference also featured discussions on the U.S. agricultural economic outlook, agricultural labor situation, and outlook and current status of environmental, social and governance (ESG) investment principles in U.S. agriculture, as well as sessions on the fruit and vegetables industry.
After his inauguration Jan. 20, Trump said that his administration would levy 25% tariffs on goods from Mexico and Canada starting Feb. 1. A day later, he said he would impose a 10% tariff on imports from China.
Trump’s pledge to deport millions of undocumented workers would also impact the dairy industry, as an estimated 50% of dairy workers, especially on bigger farms, are migrants, said Christopher Wolf, the E.V. Baker Professor of Agricultural Economics at the Charles H. Dyson School of Applied Economics and Management in the Cornell SC Johnson College of Business.
“That would be a big deal,” Wolf said, “because cows have to be milked at least twice a day, every day, with no room for choice.”
Another concern for the dairy industry is whether the Republican-controlled Congress will cut spending on food and nutrition programs, such as school lunches and supplemental nutrition for women, infants and children, said Nicholson, who is also an associate professor at the University of Wisconsin, Madison. About 8% of milk produced by dairy farms is used for the school lunch program.
Wolf said if these policy changes force dairy farms to close, that would have a devastating impact on rural communities.
“One reason why states want to attract dairy farms is dairy farms put a lot of money back into the local economy,” Wolf said. “They hire, they buy lots of inputs and they need services. Dairy farms really drive the economies of rural communities throughout the country.”
Incomes projected to drop
Beyond the impact from the tariffs and deportations, dairy farms are also projected to have lower income this year because of new regulations on milk pricing announced Jan. 16 by the U.S. Department of Agriculture (USDA).
After a two-year evaluation process, the USDA will implement new pricing regulations in June under the Federal Milk Marketing Orders. Changes to the legislation were approved in a federal referendum by milk producers in 11 geographic areas of the country.
The changes include increases in the costs of transforming milk into dairy products, such as cheese, butter and dry whey. Establishing higher values for the manufacturing costs will decrease the value of farm milk, but there was a consensus among industry organizations that the current prices allowed under the legislation did not reflect the actual costs of making dairy products.
“Basically this is going to reduce the amount that farmers will be paid for dairy components, or at least the minimum regulated amount farmers would be paid,” said Nicholson, who testified in hearings on the new pricing reforms.
The net result of the legislation is that milk prices will drop in 2025 and 2026, and recover in 2027, Nicholson said.
In 2024, milk production remained flat in the U.S., with one exception: California, the largest dairy-producing state, saw a 9% drop from November 2023 to November 2024 because of bird flu in its dairy herds, Wolf said. As of December, California had 142 herds in which the virus was detected, while the pathogen was only found in one other herd nationwide, in Nevada.
While dairy cows can return to producing milk once they recover, the USDA announced a new testing strategy in December to combat bird flu and decrease transmission of the virus to other livestock and farm workers.
One factor that may boost U.S. dairy industry profitability, Nicholson said, is the impact of the proposed tariffs on soybean exports. China, which purchases 60% of world soybean exports to provide high-protein feed for its swine industry, could halt its U.S. imports of soybeans if tariffs are imposed and replace them with imports from other countries.
Though that could create a glut of soybeans in the U.S., it would lower costs for dairy farmers that use it to produce feed for their dairy cows.
“If we have grains and oilseeds that we can’t sell to other markets,” Nicholson said, “those prices would be lower and that could be an offset to feed costs for dairy farmers.”
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