Ethanol could return to the center of the trade dispute between Brazil and the United States. According to the portal Examsources from the sugar-energy sector They fear that Trump will use the import tax on American ethanol as a bargaining chip to reduce or eliminate Brazil’s tariff, which is currently 18%.
There were no details about which items were discussed after Chancellor Mauro Vieira’s visit to American Secretary of State Marco Rubio, on Thursday (16), but this is one of the topics that can be used as an asset in the negotiations. The movement raised an alarm in the Brazilian sugar-energy sector, which fears concessions in the biofuels market.
The American complaint about the ethanol tax rate
Since February, when he turned his eyes to Brazil, Trump has insisted that there is tariff “injustice” in the US-Brazil relationship. Currently, Brazilian ethanol pays 2.5% to enter the United States, while American product faces a tax rate of 18% when entering Brazil.
FREE TOOL
XP simulator
Find out in 1 minute how much your money can yield
Pressure from corn producers, the basis for North American ethanol, has increased in recent months, as the sector faces difficulties in selling the harvest amid the loss of space in China.
The United States is today the largest global producer of corn ethanol. In this year’s harvest, the country is expected to produce 427 million tons of corn, according to the US Department of Agriculture (USDA).
“This harvest, the United States is finding it difficult to transport corn, especially to China. Therefore, Trump needs to resolve this impasse, which is a demand from local producers”, Dudu Hammerschmidt, vice-president of Grupo Potencial, a biodiesel producer, told the portal.
Continues after advertising
With the intense trade war between China and the USA, the Asian country stopped buying American corn. From January to September this year, Russia became the main supplier of grain to China, with 287 thousand tons exported.
What would the US gain?
Tariff relief could open an immediate export channel for Brazil, precisely at a time when the American Congress is discussing increasing the ethanol blend from 10% (E10) to 15% (E15) throughout the year. The measure would increase domestic demand and, without barriers in the Brazilian market, the excess ethanol from the United States would be destined for the right destination.
Even with an 18% tariff, the United States must export 650 million liters of ethanol to Brazil in the 2025/26 harvest. In other words, a growth of 160% compared to the previous harvest, according to data from consultancy Datagro.
The increase is explained by the increase in the mandatory blend in Brazilian gasoline from 25% to 30% since August, and also by the drop in the production of sugarcane ethanol. At the same time, the USA increased its global exports by almost 35% in 2024, reaching a record of US$7.5 billion.
If the import tariff were zeroed, American ethanol would have an immediate advantage in the Northeast, a region with a structural supply deficit. The product would arrive up to 15% cheaper than the national product and with logistics facilitated by its proximity to Houston. This movement would reduce the need for ethanol transfers from the Center-South to the North and Northeast, currently estimated at 1 billion liters per year, putting pressure on prices across the country.
In this way, a possible reduction from 18% to 0% in tariffs on imports of American ethanol would be beneficial for US agriculture.
Continues after advertising
On the other hand, Brazilian giants in the sugar-energy sector say that an abrupt reduction in tariffs would put American ethanol at a competitive advantage, mainly because the US subsidizes corn and, by extension, corn ethanol, which “distorts” competition.
