A leading Federated Farmers figure has called the United States dairy lobby a "compost heap" after Washington announced new export subsidies for 92,000 tonnes of dairy products.
"The US dairy lobby is more interested in protecting subsidies than in exporting on free-market principles," says Phil York, president of the organisation's Auckland province, and a member of the national board.
Fonterra and Trade Minister Tim Groser have also strongly criticised the move, which has come in spite of the recent pledge by G20 nations, including the US, to refrain from protectionism.
Australia is calling it a "serious backward step".
US Agriculture Secretary Tom Vilsack announced the move, saying it was in direct response to the European Union's introduction earlier this year of export subsidies. It would allow American exporters to compete fairly, he said.
World poised for another 'all-out trade war'
Mr York says it's a genuine shock that President Barack Obama has caved into US farmers' demands to follow the EU.
"I honestly thought the age of pork-barrel politics had passed but I'm sadly mistaken," he says, adding that farmers had respected American restraint in not retaliating against the EU earlier.
"That has all been thrown away on the compost heap that is the US dairy lobby," he says. "The world is back to five minutes to midnight for an all-out trade war and President Obama needs to get his hand off the trigger."
EU and US 'hardly setting a good example'
Fonterra's managing director of global trade, Kelvin Wickham, says it will create uncertainty at a time when prices are low, and
Mr Groser predicts it will damage world markets.
"As the world trading system struggles to counter its greatest downturn in decades, there is enormous scope for increased protectionist measures," says the minister, who is due to have trade talks with the US in early June.
"In the current international economic environment the EU and the United States are hardly setting a good example."
Mr Vilsack said that every attempt would be made to minimise the impact on countries that did not subsidise their dairy producers.