The milk pool between Northern Ireland and the Republic of Ireland is caught in the crosshairs of a trade war initiated by US president Donald Trump when he imposed sweeping tariffs on imports to the US.
On Wednesday April 2, President Trump announced a 20% tariff on all EU exports into the US, while imposing a 10% tariff on imports from the UK.
The move has resulted in a competitiveness challenge for dairy processors operating both north and south of the border in Ireland, according to lobby and business representative group, IBEC.
Speaking last evening (Thursday, April 3), executive director, IBEC Fergal O’Brien said: “There has been a lot of attention straight away in terms of the competitiveness challenge just now for Ireland.
“We have a lot of sectors which will be competing with exports from New Zealand for example, and other countries in food and dairy that are going to have lower tariffs, but the one we’re obviously particularly concerned about is the UK and the implications for the island of Ireland.
“On the export side, clearly UK exports, Northern Ireland exports, are going to face a lower tariff. That will provide competitiveness challenges and integrity of Windsor Framework challenges on the island of Ireland,” he added.
There are also concerns about the impact of differing responses from the EU and the UK in the wake of the US announcement of tariffs which are expected to impact businesses such as dairy processors both sides of the border.
“If the UK ends up with different response measures to Europe in terms of import tariffs from the US, that’s going to provide administrative hassle and complexity for businesses,” O’Brien continued.
The IBEC representative said that IBEC is engaging with its members currently to understand what supports are needed in the immediate term and how product which is already “on the seas” being exported to the US might be impacted.
IBEC has already started to engage with the government to lobby for an urgent response to support businesses in the immediate aftermath of the announcement of tariffs.
“What we really want to see from government is bringing forward as quickly as possible some sort of urgency and ‘quick wins’ around competitiveness, cost of doing business, regulatory burdens, infrastructure delivery, whatever kind of stimulus we can bring to the economy at the moment in terms of that competitiveness adjustment,” O’Brien added.
“These tariffs are such a blow to that competitiveness position, it just really needs to be done with urgency.”
Dairy exports to US amid tariffs
The US is an important market for Irish dairy exports. During the four years between 2019 and 2023 for instance, the US accounted for nearly 26% of total Irish dairy export growth.
In 2023, 24% of all Irish butter exports found their way to American households, alongside 6.5% of cheese exports, according to information from Bord Bia.
In 2024, dairy exports to the US were worth €750 million. North America grew by 4% to a value of €840 million, accounting for 13% of exports.
High butter value was the key driver of this growth, with butter rising by more than a quarter in value and volume terms. Additional cheese volumes were also evident, according to Bord Bia.
The US market also accounts for approximately 20% of Ireland’s exports of casein, the highly valued dairy ingredient used for a variety of applications including medicine and dietary supplements.
Global recession
The sweeping tariffs announced by President Trump this week have raised significant concerns about the potential for a global recession.
Chief economist with IBEC, Gerard Brady said: “The era of globalisation that we have had for the last 50 years that has really benefitted us is now in serious jeopardy in a way that it probably hasn’t been in the past.
“It’s been close to 100 years since we’ve had anything like this in the global economy and even then, we didn’t have globalisation or integrated supply chains or ‘just-in-time’ manufacturing or any of those factors the last time, so there is no historical parallel for the scale of this disruption.
“We think about three quarters of Irish exports are exempt at the moment because of the annex of Irish exports to the US, so there is a 20% tariff on a quarter of our goods effectively.
“That means you’re getting a five percentage point increase in the effective tariff on Irish exports into the US,” he added.
The IBEC economist explained that within that 25% of exports, food and drink dominates those exports going into the US.
“It’s a really serious increase on the tariff side, 20% is a massive increase,” Brady said.
“Our working assumption is that for a €1 or 10% increase in tariffs, you would see between 10% and 15% drop in Ireland-US trade. It’s about a €4-6 billion loss in exports in the short-term, in the coming year.
“This is very much focused on the short-term with the assumption, or hope at least, that this is a transactionary, a leverage play, rather than something that becomes the new normal which would be a lot more serious.
“We think there is a material chance of a recession globally, given the scale of disruption that’s going to happen, particularly between the US and Asia and a lot of global growth in recent decades has come from Asia.”
Rules of origin
In terms of the milk pool across the island of Ireland, IBEC said that Brexit has taught us how integrated our supply chains are.
“Rules of origin are particularly complex in the context of that milk pool and the products that it goes into, so we are going to have to see how that plays out,” Fergal O’Brien told Agriland.
“I think it’s really important that all the relevant authorities have an awareness of how integrated those supply chains are, there is no better example that the milk pool; the complex nature as to how that is collected, processed, the degree to which is crosses border and is an island of Ireland product.
“I think that is one sector that when the authorities come to look at some of these rules of origin issues, will just have to recognise the particular complexities of the dairy sector in the all-island economy and how it operates.”
He explained that urgent support is needed now to support businesses which already have food or drinks products in transit to the US or have just landed product stateside.
“They’re facing higher cost and some of them will struggle in terms of short-term viability at that tariff rate,” O’Brien continued.
“We need to support them and we need to be pretty immediate in the design and application of those supports so that’s our big call to government.
“The hits are going to be pretty imminent. We don’t know how long these tariffs are going to last; these are absolutely viable businesses, vulnerable in the short-term, so let’s do what we know works.
“So whether it’s product on the seas or products that are going to be hitting the market in the next number of weeks, it’s the same support that is going to be needed,” O’Brien concluded.
