Brazil’s Ethanol Tariffs Spark U.S. Retaliation Amid Trade Disputes

President Donald Trump signed a memorandum on February 13, 2025, directing the implementation of “reciprocal tariffs” on imports from countries imposing higher duties on U.S. goods.

Brazil’s 18% tariff on U.S. ethanol was singled out as a key example of trade imbalance, with potential repercussions for the ethanol market and broader U.S.-Brazil trade relations.

The U.S., which applies only a 2.5% tariff on Brazilian ethanol, imported over $200 million worth of the product from Brazil in 2024 but exported just $52 million in return.

This disparity reflects a significant decline in trade since 2018, when U.S. ethanol exports to Brazil peaked at $761 million. Brazil’s measures, including an 18% tariff and prior restrictions like tariff-rate quotas, have frustrated U.S. producers.

They face limited domestic demand growth due to factors like fuel efficiency and electric vehicles. Trump’s memorandum aligns with his broader strategy to address trade deficits and perceived unfair practices.

Federal agencies will review trade policies and propose adjustments by April 1, potentially giving Brazil time to respond. While the tariffs are not immediate, they could disrupt industries reliant on Brazilian sugarcane ethanol, such as sustainable aviation fuel (SAF), valued for its low carbon footprint.

Brazilian officials criticized the move as one-sided, highlighting U.S. restrictions on sugar imports as a counterpoint. Energy Minister Alexandre Silveira called for broader negotiations to ensure fairness across all sectors.

The ethanol trade has already shifted significantly, with South Korea surpassing the U.S. as Brazil’s top ethanol importer in 2024. Whether these tariffs will restore balance or deepen trade tensions remains uncertain.

However, they underscore growing challenges in global trade policy that could affect investors, policymakers, and industries reliant on international markets.