Ethanol tariffs play key role in USTR probe of Brazil

The Office of the US Trade Representative has opened a formal investigation into Brazil's trade practices, citing Brazil's tariffs on US ethanol exports as a key reason for the move.

The investigation by US trade representative Jamieson Greer, under Section 301 of the Trade Act of 1974, will examine whether the government of Brazil has engaged in "unreasonable or discriminatory" burdens on US commerce, including "unfair, preferential tariffs" and a restriction on "ethanol market access," according to the USTR's release on late July 15.

"Brazil has walked away from its willingness to provide virtually duty-free treatment for US ethanol and instead now applies a substantially higher tariff on US ethanol exports," the announcement said.

The Section 301 process includes a consultation process with representatives of the government under question, a comment period, and a public hearing, which is scheduled for Sept. 3. In a July 11 letter posted on Truth Social, US President Donald Trump said he would impose 50% tariffs on Brazil on Aug. 1 if the two countries did not reach a trade deal.

"After consulting with other government agencies, cleared advisers, and Congress, I have determined that Brazil's tariff and non-tariff barriers merit a thorough investigation, and potentially, responsive action," Greer said in a statement.

Ethanol trade

Brazil currently imposes an 18% tariff on imports of corn-based ethanol from the US, which was implemented in 2020. The US, meanwhile, imposes a 2.5% on ethanol imports from Brazil.

The US exported 489 million gallons of ethanol to Brazil in 2018, with a value of $761 million, according to the Renewable Fuels Association, one of the ethanol industry's largest trade groups. In 2024, the US exported just 28 million gallons to the country, or $53 million.

Both statistics were cited by the USTR in its notice to the Federal Register July 15, alongside the conclusion that "US ethanol producers are at a significant disadvantage under the current system."

While broader US energy interests have tended to criticize US President Donald Trump's tariff policies, ethanol groups have long sought a targeted approach to solving its dwindling access to Brazil's market. In late 2024, as industry braced for the impact of President-elect Trump, RFA President and CEO Geoff Cooper told Platts his membership had "trepidation" about inviting retaliation by "painting with too broad a brush," but that it supported a stronger stand against Brazil.

"We applaud the Trump administration for this important action," Cooper said in a July 16 statement. "For almost a decade now, we have spent precious time and resources fighting back against an unfair and unjustified tariff regime imposed by Brazil's government on US ethanol imports."

"Today's action by USTR is a sign that the old days of Brazil enjoying unfettered access to the US ethanol market while unfairly putting a tariff on American ethanol imports could soon come to an end," Growth Energy CEO Emily Skor said in a statement on July 15. "We applaud USTR for taking this concrete step to dig further into Brazil's unfair treatment of American ethanol and hope that it ultimately leads to a more level playing field for US farmers and biofuel producers."

The US industry is eager for new overseas markets. Domestic regulatory restraints on higher blends and consumers' increasing adoption of more fuel-efficient and electric vehicles have spurred demand concerns. The US produces more ethanol than any other country, and legal blending requirements can lead to oversupply.

In 2023, the US exported a total of 92,000 b/d of ethanol, according to the EIA.

Political disputes

The ethanol fight was just one of a handful of issues cited in Greer's announcement. The trade representative also said Brazil "may" retaliate against US social media companies "for failing to censor political speech" and cited poor anti-corruption enforcement, intellectual property protections and illegal deforestation, "thereby undermining the competitiveness of US producers."

The formal investigation follows Trump's threats of 50% tariffs July 11 -- an increase from the 10% tariff rate he had previously proposed in April, and one that analysts said could presage at least a mild reshuffling of some refined products flows, particularly if US diesel imports were not exempted.

In the letter, Trump argued the US had a "longstanding, and very unfair" trade relationship with South America's largest country. The US President also said former Brazilian president and vocal Trump supporter Jair Bolsonaro, who is charged with attempting to overturn his 2022 election loss, was the subject of a "witch hunt."

Brazilian Luiz Inácio Lula da Silva, in a statement posted to X, said Bolsonaro's trial falls under the jurisdiction of Brazil's Judicial Branch and was "not subject to any interference or threats that could compromise the independence of national institutions." Da Silva also noted the US has run a $410 billion trade surplus with Brazil over the past 15 years.

"Brazil is a sovereign nation with independent institutions and will not accept any form of tutelage," da Silva said. He pledged to set retaliatory tariffs at the same rate as the US if a deal was not reached by Aug. 1.