KEY POINTS
?Food producers across Europe are bracing for a financial hit from U.S. tariffs that take effect Friday.
?In the north-central region of Italy, home to the production of parmigiano-reggiano cheese, exports to the United States now face a 25% levy.
?Italy has more than doubled its global cheese exports in the past decade, and now ships around $3.3 billion worth of cheese overseas each year.
Food producers across Europe are bracing for a financial hit from U.S. tariffs that take effect Friday after the Trump administration pounced on a WTO ruling over subsidies to Airbus as a casus belli for a new front in its aggressive global trade strategy.
In the north-central region of Italy, where the country's flavorful Parmigiano-Reggiano cheese has been produced for close to a millennia, tens of thousands of workers at thousands of farms and hundreds of dairies have found themselves in the tariff firing line, with exports to the United States now facing a 25% levy.
At the Bertinelli family farm just southwest of the city of Parma, for which the ancient cheese is named, massive wheels that weigh the same as a small child mature for up to three years in row after row of towering racks.
Before dawn each day, workers at this caseificio — or dairy producer — combine a skimmed milk that has separated in long trays overnight with fresh milk delivered from nearby farms. They heat it in vast copper cauldrons then curdle it with an enzyme found in cow stomachs.
The curdled milk sinks to the bottom of the enormous vats, and after it has clumped together into a firm mass it is hoisted out with cheesecloths, and shaped into the drum-like form that makes Parmigiano-Reggiano so recognizable.
Each cheese wheel is later dipped in a salt solution to harden its external crust and is imprinted with the letters D.O.P.
The letters are an acronym for the Italian phrase "denominazioni d'origine protette," which translates as "protected designation of origin." This is an EU labeling device intended to guarantee the authenticity of a product's geographical origins and to protect local producers to guard against cheaper replicas.
Of all the registered protected designation products in the EU, Italy holds a quarter of them, a move that continues to anger dairy competitors in the U.S.
The U.S. National Milk Producers Federation earlier this month called it a "particularly egregious example of EU trade practices" and said the bloc was "abusing the use of geographical indications to limit competition from cheese exporters in the U.S. that use common food names."
Case in point: parmesan, or as the Italians insist their product should be referred to, Parmigiano-Reggiano.
"We want to tell American citizens that when they eat 'parmesan' they are eating a fake," the Italian Minister for Agriculture Theresa Bellanova told CNBC. "That is identity theft of our original products, and we cannot accept it."
Italy has more than doubled its global cheese exports in the past decade, and now ships around $3.3 billion worth of cheese overseas each year, with Parmigiano-Reggiano the fastest-growing source of export revenue.
Around half a billion dollars worth of Italian exports each year, much of it cheese, will now face American tariffs. The Parmigiano-Reggiano Consortium, which has overseen quality control for the cheese's production since 1934, estimates U.S. importers will have to pay around $200 more for each Parmigiano-Reggiano wheel, and producers say they expect sales volumes across the Atlantic will consequently crumble.
"The U.S. is the second-most important market for us overseas," says Fabrizio Raimondi, the consortium's external relations director. He and the consortium's president, Nicola Bertinelli, are convinced that harder cheeses like theirs have been targeted to allow American imitation "parmesan" cheese to seize market share.
And Italian producers may have good reason to be slighted, since their government did not participate in the multinational consortium behind Airbus, unlike Germany, Spain, France and the U.K, which all now face tariffs on their own products, ranging from wine to whiskey, aircraft to olives.
"Of course we are not happy," Italy's new finance chief, Roberto Gualtieri, told CNBC when asked whether he felt it reasonable that other nations' previous subsidies to Airbus might lead to American punishment of Italian producers. "It would be totally unfair to target Italian exports for an issue, by the way, about which Italy is not responsible at all." 
Bellanova said Italian Prime Minister Giuseppe Conte and Minister of Foreign Affairs Luigi di Maio will now work to counteract the new tariffs by aggressively promoting Italian food products around the world, especially in the United States, while producers damaged by the tariffs could receive government aid to make up for lost revenues.
But for the farmers that provide the cheesemakers, the second order effects may be harder to counter.
Saverio Delsante is a sixth-generation dairy farmer close to Parma, with 150 cows that produce more than 1,100 gallons of milk each day, which is about enough to make just 14 wheels of Parmigiano-Reggiano.
"We are small dairy, we aren't like industries," he told CNBC beside a stall containing a cluster of young calves. "We don't produce thousands and thousands of cheese."
For his milk to be used at a local Parmigiano-Reggiano caseificio, his farm must fall within a circumscribed region of roughly 4,000 square miles across four Italian provinces and must comply with a very strict and expensive set of regulations when it comes to feeding and housing his cattle.
His milk does command a premium, selling at double the price of ordinary industrially produced milk, but he is aware that the price of the cheese itself has to be as competitive as possible, despite it being what he calls "the best cheese in the world."
And Delsante says that because the market for that end product is already beholden to a very small group of large, international buyers, the U.S. trade actions could present a "serious problem" for his own farm's future.
"I'm worried about these tariffs," he said, "not only for the agriculture but for every sector."
PUBLISHED FRI, OCT 18 2019
Willem Marx