Brazil Poised to Concede on Ethanol Tariffs Amid US Trade Negotiations
Brazil is preparing to concede on ethanol tariffs in exchange for US tariff reductions on coffee and beef, but domestic producers fear negative impacts.
- • Brazil may reduce the 18% tariff on US ethanol imports to secure tariff cuts on coffee and beef exports to the US.
- • Ethanol producers in Brazil's Northeast are vulnerable to increased competition from US ethanol imports.
- • Negotiations between Presidents Lula and Trump have so far yielded optimism but no concrete tariff reductions.
- • The Brazilian ethanol industry is noted for its lower carbon footprint compared to US corn-based ethanol production.
Key details
Brazil is preparing to make concessions on its ethanol import tariffs as part of broader trade negotiations with the United States. The Brazilian government aims to reduce the 40% tariff on key exports like coffee and beef to the US by potentially lowering the 18% tariff currently imposed on US ethanol imports. This tariff reduction is seen as a bargaining chip to advance stalled US-Brazil trade talks. However, industry experts express concerns that increased imports of US ethanol could severely impact Brazilian ethanol producers, particularly those in the Northeast region, where competition may lower prices and margins.
Despite high-level meetings between Brazilian President Lula and US President Donald Trump generating optimism earlier this year, technical negotiations have yet to yield concrete progress. Talks have so far resulted only in agreements to continue discussions, with an anticipated resolution timeline possibly stretching weeks or months. US interests also include securing access to Brazilian markets for ethanol, among other strategic commodities like rare minerals.
Brazil’s ethanol industry plans to increase production significantly next year. Yet, the market could face challenges if US ethanol enters Brazil more freely, threatening local producers who benefit from Brazil’s ethanol being derived largely from sugarcane, which has a lower carbon footprint compared to US corn-based ethanol. Historically, Brazil had ethanol import quotas from the US until 2020; the current negotiations may revisit these arrangements.
The Brazilian government also considers including sugar market issues in the negotiations to balance trade dynamics. While Brazil indicates readiness to lower ethanol tariffs, analysts remain cautious about imminent substantial breakthroughs, highlighting the complexity of US political considerations and competing American priorities, particularly regarding China.
Overall, the forthcoming trade deal may involve partial concessions on ethanol tariffs but is unlikely to completely eliminate them soon. Stakeholders watch closely as these sensitive talks continue with significant implications for Brazil's ethanol industry and bilateral trade relations.