January 11th is National Milk Day and this year, the U.S. dairy industry has a lot to celebrate.

While the 2022 baby formula crisis grappled the United States, the National Milk Producers Federation called on Congress to resist new action. In November, the group urged Congress to oppose any efforts to extend the tariff suspensions emergently granted to baby formula imports amidst the crisis. Unsurprisingly, Big Dairy succeeded—on January 1st, the tariffs returned on imports of infant formula meaning these imports are again subject to an effective tax of about 25 percent.

To recap, the baby formula crisis began in early 2022 when Abbott Nutrition shut down its formula manufacturing plant in Sturgis, Michigan after the Centers for Disease Control discovered traces of a bacteria possibly linked to two infant deaths. Abbott produces about 40 percent of U.S. infant formula, primarily at its Sturgis facility. The factory closure created a supply shock that reverberated through America and parents quickly faced empty store shelves. Myriad trade and regulatory restrictions encumbered retailers, preventing them from quickly restocking with available (and safe) foreign-made formula. Thus, the government needed to act.

Here’s an abbreviated timeline of the federal response:

• In May, President Biden used military aircraft to fly in formula from Europe and the Food and Drug Administration (FDA) relaxed enforcement on formula imports.
• In July, Congress passed legislation suspending tariffs on most infant formula imports.
• In August, the U.S. Department of Agriculture (USDA) waived certain Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) requirements to allow recipients to use benefits on any formula brand, including imported formula.
• In September, Congress passed legislation suspending tariffs on infant formula base powder.

Policymakers correctly identified the problematic policies, particularly trade policies, that needed liberalization but all the measures are temporary. Aside from the absurdity that comes with taxing a necessity like baby formula (although, it’s not uncommon for the federal government to tax necessities and for the same reasons these tariffs on formula exist in the first place—ignominious special interests), reinstating tariffs on formula imports is completely nonsensical since the emergency trade liberalization on foreign formula abated the crisis.

What’s worse is that only the tariff suspension measures were not extended. Both the FDA and USDA extended their actions—a tacit acknowledgement of the necessity of imports.

The FDA approved eight new companies to sell in the United States without requiring complete compliance with agency rules until October 2025 so that safe formula could be quickly imported to the U.S. However, foreign formula from these firms is again subject to tariffs. In fact, Kendamil, a British formula company, which was one of the first companies granted approval from the FDA wants to stay in the U.S. market and even expects to send six times as much formula to the United States this year compared to 2022. However, Kendamil’s co-founder stated that the tariffs are a factor but suggested that they do not want to raise prices the full amount of the tariff (which could reach over 20 percent), but likely will need to pass some of the cost on to consumers.

Further, given that most WIC recipients can only buy formula in store since online use of benefits remains in the pilot stage, the USDA extended waivers for recipients to use their benefits on non-contracted formula. Until February 28, 2023, WIC recipients may use benefits for a non-contracted brand of formula, including brands imported under the FDA’s enforcement discretion. For infants needing specialty formula, waivers are extended until June 30, 2023.

As 98 percent of baby formula consumed in the United States is produced domestically, this crisis demonstrated that protectionism-driven onshoring carries the risk of weakening an industry by making predominantly domestic supply chains more vulnerable to local shocks and slower to adjust than diversified, globalized ones. Disappointingly, policymakers failed to glean important lessons from the crisis and squandered the opportunity to liberalize an industry in dire need of free market reform. As a result, the U.S. maintains an infant formula market vulnerable to shocks and parents will pay higher prices to feed their babies.

At least, it’s a happy new year for Big Dairy.