Brazilian Talk of Higher Tariffs on US Ethanol Sparks Idea of Retaliation

Source: By Todd Neeley, DTN Staff Reporter • Posted: Thursday, August 13, 2020

With time running out on Brazil’s current ethanol tariff on some U.S. ethanol imports and a pending threat to set a new tariff on all of those imports, the Renewable Fuels Association is asking the U.S. trade representative to impose tariffs on all Brazilian imports.

President Donald Trump said during a news conference on Monday his administration is considering a reciprocal tariff against Brazil.

In response to a reporter’s question Trump said, “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.”

In a letter to U.S. Trade Representative Robert Lighthizer on Tuesday, RFA President and Chief Executive Officer Geoff Cooper said the Brazilian tariffs have been weighing on U.S. producers.

“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,” Cooper wrote.

Brazil’s current tariff rate quota is set to expire at the end of August. Brazilian ethanol industry and government officials have suggested slapping a 20% tariff on all U.S. ethanol imports starting in September.

U.S. ethanol exports to Brazil have fallen as a result of the tariff rate quota and over-quota tariff. Those exports dropped by about 33% from 2018 to 2019. The RFA said those shipments continue to fall in 2020, and U.S. producers have lost about 350 million gallons of demand for ethanol since late 2017, valued at about $400 million.

“Meanwhile, U.S. imports of duty-free Brazilian ethanol are surging,” Cooper said.

Brazil’s July ethanol exports hit a seven-year high, he said. “In addition, imports from Brazil are being encouraged by federal and state policies that assign premium value to sugarcane ethanol due to dubious lifecycle greenhouse gas modeling results. 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.”

Currently, Brazil can import 198 million gallons of fuel ethanol from the U.S. tariff-free. Import volumes exceeding the quota are charged a 20% tariff.

“Worse still, some agriculture and trade officials in Brazil are suggesting the tariff on U.S. ethanol should be raised further to as much as 35%,” Cooper said in the letter.

“Such a move by Brazil would be devastating to the U.S. ethanol industry, which is already suffering from the negative effects of COVID-19 on world fuel markets.”

Todd Neeley can be reached at todd.neeley@dtn.com

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