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US tariffs may shut Brazil's ethanol import window

  • Märkte: Biofuels
  • 31.07.25

The US' planned 50pc tariff on Brazilian goods would have little effect on the ethanol market, but any Brazilian response to the US could curtail the large volumes of US ethanol Brazil expected to import this crop-year.

US president Donald Trump slapped additional tariffs of 40pc on some products from Brazil, set to start on 6 August. This takes total taxes on Brazilian ethanol to 52.5pc, including the initial 2.5pc tariff plus the 10pc "Liberation Day" tax imposed in April.

Brazilian market participants do not expect a major impact domestically because Brazil exports little ethanol to the US compared with its output.

Brazil shipped about 304,000m³ (5,200 b/d) of ethanol to the US in its latest sugarcane crop period — which lasted from April 2024 to March 2025 — according to trade ministry MDIC. That accounts for only 0.8pc of ethanol Brazil produced from sugarcane and corn in the period, according to national supply company Conab.

A significant portion of Brazil's ethanol exports to the US are through long-term contracts. Some US companies get duty drawbacks, a refund on tariffs they paid on imported goods that will be used as feedstocks for making a product that will be exported. In those cases, Trump's 50pc tariffs have little to no effect.

Market participants expect contract volumes will pull back slightly as of February 2026, because supply contracts through January are already secured.

Most of Brazil's ethanol production is consumed domestically, given the demand from the many flex-fuel vehicles and blend mandates. Internal consumption may increase even further once the new ethanol blending mandate — which will increase the amount of ethanol in gasoline to 30pc from 27pc — comes into force on 1 August.

Brazilian tariffs to rise?

The ethanol industry is now waiting to see if the Brazilian government will tweak its tariff barriers on US production.

Brazil now charges an 18pc tax on all ethanol imports from outside the Mercosur trading bloc.

If Brazil cuts or eliminates the tariff in a conciliatory move, the arbitrage window may open and result in ethanol imports above the current 400,000-800,000 m³/yr (10,500-21,000 b/d) range some market participants expect for the 2025-26 crop.

Most of that volume would be sent to ports in Brazil's northeast, thanks to its proximity to the US and lower freight costs.

But if Brazil retaliates with higher tariffs, it could shut the arbitrage window that some importers were hoping to see open as of September.

There is one exception — one unnamed Brazilian biofuel company with sizable imports gets a duty drawback in Brazil. Tariff tweaks will not change its plans of importing ethanol volumes from the US Gulf in this crop year.


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