US import tariffs on Brazilian goods and the threat of reciprocal measures have curbed trade between the nations, cutting cargo numbers available to specialised tankers. But this could drive up trade on other routes.
Washington's 50pc import tariff on Brazilian goods, effective from 6 August, takes US tariffs on Brazilian ethanol, a common product flow requiring specialised tankers, to 52.5pc. A tariff this high would undoubtedly cut trading volumes available to specialised tankers, in the near term at least.
As the US is one of Brazil's primary ethanol export destinations, sellers might ramp up exports to other markets to plug a the gap. The EU is a leading importer of Brazilian ethanol, and the finalisation of the EU-Mercosur trade agreement could substantially boost this trade. The current terms of this agreement would provide maximum quotas high enough to entirely cover the amount of Brazilian ethanol exports to the bloc, and slash EU import tariffs by around two-thirds. This could support much higher exports of ethanol from Brazil to the EU on specialised tankers, as long as Brazilian domestic demand does not absorb the supply.
It is unlikely that US exports would jump to meet EU demand, considering the EU has made no commitments to lowering market access barriers for US ethanol as part of its trade deal.
Brazil's exports of tallow, a biofuels feedstock, to the US are also likely to drop, prompting exporters to look for new markets, either domestic or in Europe.
Some chartering activity could be sustained between Brazil and the US, as biofuels producers in the latter country could be able to claim a "duty drawback". This would refund up to 99pc of the duties, taxes and fees paid during the import process, if they use Brazilian tallow to produce HVO and SAF for export to common destination markets including Canada, the Amsterdam-Rotterdam-Antwerp (ARA) hub, or the UK.
With falling Brazil-US trade, it is likely that shipowners will focus on positioning vessels in US Gulf coast market or instead compete for long-haul cargoes of ethanol or soybean oil from Latin America to west coast India and east Asia.
In the build-up to Trump's executive order, Brazilian president Luiz Inacio Lula da Silva said his administration would consider import tariffs on US goods under Brazil's economic reciprocity law. The US exports caustic soda, glycols and methanol to Brazil on specialised Stainless Steel J19s, Handysizes and Medium Range tankers.
The US exports far higher amounts of products that require specialised tankers to Brazil, than Brazil does to the US. Of methanol, ethanol, aromatics, glycols, caustic soda, sulphuric acid, vegetable oils and biofuels, the US exported 4.23mn t to Brazil in 2024 while Brazil exported 651,000t to the US, Kpler data show. This means any reciprocal measures from Brazil would probably have more of an effect on the regional specialised tanker market.
Brazil is the leading importer of US caustic soda but Brazil's imports from the US declined by more than 16pc in June from a year earlier, according to GTT, as market participants sought to avoid facing tariffs mid-shipment. Cargo volumes heading to Latin America in the US Gulf coast specialised tanker spot market have dropped even further in recent weeks.
Many expected Brazil to begin importing more US ethanol this year to supply a new fuel mandate that increases ethanol blending in gasoline to 30pc from 27pc. Importing US ethanol could become unviable if the Lula government decides to implement import tariffs.
It is unclear if Brazil will implement reciprocal tariffs. The most recent finance ministry response plan included credit concessions, an increase in government purchases but did not mention reciprocal measures.
