Tariffs, Now With Extra Cheese : The Indicator from Planet Money The U.S. has been renegotiating trade deals and putting tariffs on different goods. Meanwhile, other countries are re-negotiating their trade agreements and some deals are leaving U.S. producers out.

Tariffs, Now With Extra Cheese

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Sartori is a company that makes specialty cheeses, things like Parmesan and aged cheddar. Sartori is based in Wisconsin, but their business is global. It's been exporting cheeses to countries like Italy and Japan since the '70s.


Jeff Schwager is the president of Sartori. And he told us in the last five years, exports have really taken off for the company.

JEFF SCHWAGER: The U.S. Dairy Export Council recognizes one company every year, not just in cheese, but for the whole dairy category. In 2017, we were the U.S. dairy exporter of the year.

VANEK SMITH: The company threw a party to celebrate.

KULAS: And I asked Jeff, you know, like, what was on the cheese board that day?


KULAS: They were celebrating. They were celebrating. They had one of their hippest cheeses on the cheese board. It is a best-seller in Europe. Jeff describes it as somewhere between a Parmesan and a cheddar, but the rind has been rubbed with coffee beans.


VANEK SMITH: This is a best-seller?

KULAS: This is their best-seller in Europe.

VANEK SMITH: Well, it keeps you awake and is good for your bones. So that's a double-win.

KULAS: I feel as if I would like two of my favorite things in one cheese, but...

VANEK SMITH: That's true.

KULAS: ...I'm not sure I want them to meet.

VANEK SMITH: But, of course, life is not always coffee and cheese. Less than a year after that celebration, President Donald Trump made an announcement that had big implications for Sartori.


PRESIDENT DONALD TRUMP: We will have a 25 percent tariff on foreign steel and a 10 percent tariff on foreign aluminum.

VANEK SMITH: Jeff had a feeling that this was actually going to trickle down to his cheese business. And he was right.

KULAS: This is THE INDICATOR. I'm Elizabeth Kulas.

VANEK SMITH: And I'm Stacey Vanek Smith. Today on the show, the obvious and not-so-obvious consequences of a trade war.

KULAS: Told through cheese.

VANEK SMITH: All the best stories are told through cheese.


KULAS: Thirty years ago, there wasn't a huge demand for fancy American and European cheese in Mexico. But after NAFTA came along in the mid-'90s, American cheese companies like Sartori saw an opportunity - an opening. They were going to make a market for their cheese.

SCHWAGER: It's a long, hard road to go educate the consumer, you need to try this. So basically, what we do is we spend a lot of money sampling product. We feel if we can get a customer to try it, they're going to like it.

VANEK SMITH: Sartori ran in-store promotions and offered samples of cheeses like fontina and cheddar in Mexican grocery stores. It also convinced Mexican fast-food chains to use cheeses like Parmesan in their recipes.

KULAS: And it worked. Mexico became Sartori's biggest export market. Mexican customers were snapping up Sartori's Parmesan, cheddar, fontina. But one of their other big sellers was this cheese called Asiago. Asiago is a cow's milk cheese. It's got this kind of nutty flavor, light yellow in color.

VANEK SMITH: Enter Trump's tariffs. Jeff said he was totally blindsided, and things changed really fast. Right after Trump's announcement, China and Mexico retaliated with their own tariffs on a list of American goods, things like pork, bourbon and cheese.

KULAS: Not only that, in all of the upsets and disruption from the Trump administration's trade shake-ups, Europe saw an opportunity to lock down an agenda they'd been pursuing for decades. So they started going around the U.S., hammering out trade agreements with Japan, Canada, Mexico. And a key part of that agenda is food protections.

VANEK SMITH: The official term for this is geographical indications. And this is basically a special protected status for food. So things like champagne are protected in this way. You cannot call Champagne Champagne unless it comes from Champagne, a particular region in France. The same goes for Parmigiano-Reggiano.

KULAS: And if you can get your product recognized with a geographical indication, it could be worth a lot of money. A recent study from the United Nations' Food and Agriculture Organization looked at nine products that got geographical indications. The price of every one of those increased, in most cases by 20 to 50 percent.

VANEK SMITH: And that is part of why Europe has been pushing for protected status for all kinds of foods. It would mean a lot of money for the countries making these foods. So it started pushing for feta from Greece, manchego from Spain.

KULAS: But it would also mean that U.S. producers couldn't call their feta feta anymore, or their manchego manchego. They'd have to come up with some alternate name, and that would likely hurt sales. But the U.S. has also pushed back on general names for years, and the European Union has largely had to accept that.

VANEK SMITH: Until now. Since the U.S. started putting tariffs in place and renegotiating trade agreements, the EU saw its moment to build this food protection into trade negotiations. When it was updating a trade deal with Mexico in April, they included protection for more than 300 food and wine products from Europe.

KULAS: And Jeff at Sartori, he got word that one of his top-selling cheeses was on the chopping block. It was going to get a protected status.

SCHWAGER: They agreed that Asiago is going to be a geographic indicator going forward.

KULAS: Asiago is not just a cheese. It's also a town in the north of Italy. And because of this deal, the only cheese that can call itself Asiago in a Mexican grocery store will have to come from that town in Italy.

VANEK SMITH: Suddenly, Sartori cannot call its Asiago Asiago in Mexico. Not only that, remember Jeff's non-Asiago Asiago is also subject to a 25 percent tariff in Mexico as part of the retaliation to President Trump's steel and aluminum tariffs. Same thing happened to Sartori's Parmesan.

KULAS: So Jeff had a choice. He could pull out of this hard-won Mexican market he'd worked so hard to break into, or he could try to fight back. So he chose to fight. Jeff and his Mexican importers knew a 25 percent price hike would probably kill their business, so they decided to absorb the costs themselves to avoid passing the price increase onto their consumers.

SCHWAGER: So what was profitable business for all of us now is breakeven at best. We're all probably losing a little money. But we made that decision because we didn't want to give up the shelf space at the grocery stores. It took years to get it. If we give it up now, it'll take us years to get back.

VANEK SMITH: But that hard-won shelf space was for Asiago and Parmesan, and Jeff cannot use those names anymore. If he wanted to keep selling his Asiago cheese in Mexico, he was going to have to come up with a new name.

SCHWAGER: Well, you sit down, and you brainstorm, what names can we use?

KULAS: So you're sitting in a room. Is it just like a whiteboard situation, and people are just...


KULAS: ...Throwing out names?

SCHWAGER: Throwing out names. No bad ideas at that point. When you come up with a new name, you want it where you've got, you know, some chance that the consumer will remember it and will link it to the product. But at the same point, because of trademark law, you can't create confusion for the consumer. It's not easy.

KULAS: Jeff and his staff came up with a list of options. The finalists included a few that they passed on to me, Stacey. The first one, Alexandra-style cheese.


KULAS: Alexandra-style. The next one - my favorite, I have to say - Maria-style cheese. Maria-style.

VANEK SMITH: OK. OK. I like it.

KULAS: But in the end, they decided on this.

SCHWAGER: So we had to take part of the Sartori name and part of the Asiago name and blend them together. So we had to change the name of our Asiago product in Mexico to Sartiago.

VANEK SMITH: Sartiago cheese.

KULAS: Sartiago.


KULAS: It's a hybrid.

VANEK SMITH: It's Sartiago. Pass the Sartiago.

KULAS: Can I have a slice of that Sartiago?

VANEK SMITH: Would you like some Sartiago and crackers?

KULAS: Yeah. I mean, Jeff says when he looks at the label, he knows it's the same product inside. But he also knows that the majority of people will write the name of a particular cheese on their shopping list, like cheddar or Brie or Asiago.

VANEK SMITH: Yeah. From a recipe or whatever you like or something. Yeah.

KULAS: Right. And losing that name means his cheese can easily just get left on the shelf. And, in fact, since they rolled out Sartiago, revenue on that cheese has dropped by 30 percent.

Do you dream that one day people might write Sartiago on their grocery list instead?

SCHWAGER: Well, you know, we hope. But what I would prefer is that the tariffs are short-lived here and that we get geographic indicators out of trade agreements.

VANEK SMITH: Meanwhile, though, everyone just seems to be kind of moving in the direction of food protections. For instance, the EU's free trade agreement with Japan, which is expected to take effect in the next year or so, lists a bunch of protected cheeses, including Asiago. Trade agreements with Vietnam and Singapore are raising the prospect of even more.

KULAS: For his part, Jeff is hedging his bets. Now when Sartori creates a new cheese, it gives a unique trademark name for that cheese right from the beginning. Just like with that hybrid coffee cheese that they served...

VANEK SMITH: Oh, yeah. That they served at the party.

KULAS: ...They served at that big party last spring when they won exporter of the year.

VANEK SMITH: It got a trademarked name?

KULAS: Of course it did - BellaVitano Espresso.

VANEK SMITH: (Laughter).

KULAS: Of course, they've trademarked it.

VANEK SMITH: (Imitating Italian accent) BellaVitano Espresso.

KULAS: Italy in a name, kind of - by way of Wisconsin.


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