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White House considers reciprocal tariffs on Brazilian ethanol

U.S. fuel ethanol exports to Brazil have fallen dramatically under country’s TRQ and 20% over-quota tariff.

President Donald Trump’s announcement Monday that his Administration is considering reciprocal tariffs on fuel ethanol imports from Brazil received support from the Renewable Fuels Assn. (RFA). The country’s existing tariff rate quota (TRQ) is set to expire at the end of August, and some Brazilian industry and government officials have suggested that all U.S. ethanol should be subject to a tariff of at least 20% beginning in September.

In response to a reporter's question about Brazil’s tariff on ethanol, Trump responded on Monday that “as far as Brazil is concerned, if they do tariffs, we have to have an equalization of tariffs. … You may be seeing something on that very soon.”

Following the President’s remarks, RFA president and chief executive officer Geoff Cooper wrote in a letter to U.S. Trade Representative Robert Lighthizer, “While we would strongly prefer a return to the free and fair two-way ethanol trade relationship that we enjoyed with Brazil between 2012 and late 2017, it has become clear that the Brazilian ethanol industry (and some of the nation’s political leaders) no longer share our desire for free and open markets. Regarding ethanol trade, Brazil has chosen a path of protectionism and obstruction; unfortunately, at this point, it appears we have no choice but to respond in kind.”

Cooper noted that U.S. fuel ethanol exports to Brazil have fallen dramatically due to the country’s TRQ and 20% over-quota tariff. Brazil’s protectionist policies caused 2019 U.S. ethanol exports to Brazil to fall 33% compared to 2018, and shipments continue to slide in 2020. By some estimates, Brazil’s trade barriers have already resulted in the loss of demand for nearly 350 million gal. of U.S. ethanol valued at nearly $400 million since late 2017.

Meanwhile, Cooper said, U.S. imports of duty-free Brazilian ethanol are surging; year-to-date U.S. imports of Brazilian ethanol are at a seven-year high and nearly triple the five-year average volume for the same period.

In concluding the letter, Cooper wrote, “Please know that the U.S. ethanol industry strongly supports the President’s goal of restoring fairness in ethanol trade with Brazil, and the Renewable Fuels Assn. stands ready to work with you and the Administration to ensure reciprocity and equity is achieved."

TAGS: Policy
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