Brazil is pushing back against the Trump administration’s complaints about ethanol tariffs by highlighting the lack of reciprocal access for Brazilian sugar in the U.S. market. Brazilian officials argue that any discussion of fair trade should include addressing the high tariffs and quotas on Brazilian sugar exports to the United States. But U.S. interests dispute some of Brazil’s claims, saying tariffs are just one part, with subsidies and nontariff trade barriers in Brazil a key component of their policy framework.
U.S. ethanol industry groups are welcoming President Donald Trump’s attention to Brazil’s ethanol tariffs, which impose an 18% duty on U.S. exports while Brazilian ethanol faces only 2.5% U.S. duties. Trump’s plan for reciprocal tariffs, highlighted in a Feb. 13 memorandum, signals potential trade action against countries maintaining such disparities. While specific U.S. duties in response remain uncertain, Commerce Secretary nominee Howard Lutnick suggested that new tariffs under the reciprocal trade plan could take effect as early as April 2.
The U.S. ethanol sector has long sought greater access to Brazil, previously its top export market before tariffs were imposed in 2020. Industry leaders argue that Brazil’s restrictions, along with exclusion from the RenovaBio program, unfairly disadvantage U.S. producers. Growth Energy and the Renewable Fuels Association praised Trump’s stance, calling for a level playing field.
Brazil’s counterarguments
- Sugar tariffs: Brazil’s Energy and Mining Minister Alexandre Silveira pointed out that the U.S. imposes a $360-per-tonne tariff on sugar imports outside preferential quotas, which translates to an 81.2% tax based on current prices. This is significantly higher than Brazil’s 18% ethanol tariff. (The U.S. has only a 2.5% import tariff on Brazil ethanol.) Brazil’s sugar tariffs are: WTO applied MFN duty @ 14.4% and Bound rate @ 35%. Link for details.
- Limited sugar quota: Silveira noted that the U.S. set a sugar import quota for Brazil at 147,540 tonnes last harvest, representing only 0.4% of Brazil’s total sugar exports. This restrictive quota severely limits Brazil’s ability to export sugar to the U.S. market., he said. However, Brazil gets nearly open access to the U.S. sugar market for its WTO quota. Above that it has to pay an out-of-quota duty. The WTO quota is about 156,000 metric tons — they get that essentially duty free into the U.S. (U.S. sugar industry officials note that Brazil was the number 1 exporter to the U.S. last year (2024) at over 1.3 million metric tons.)
Call for reciprocity: Brazilian officials argue that for Trump’s plan to be fair, as he claims, the U.S. should eliminate tariffs on Brazilian sugar. They emphasize that historically, Brazil and the United States have negotiated ethanol and sugar trade together.
The American Sugar Alliance (ASA) does not agree. Rob Johansson, Director of Economics and Policy Analysis at the ASA points out, “The United States is the world’s third largest sugar importer and under the World Trade Organization (WTO) we are committed to providing access from 40 countries, at low or zero duty. For decades, Brazil has enjoyed significant access to our market due to previously determined allocations under the WTO, despite the Brazilian government’s long-term subsidization of its massive sugarcane industry. Increasing Brazil’s already generous access to the U.S. sugar market could harm thousands of family sugar farmers and factory workers and would certainly create huge multilateral trade problems with all of our other reliable trading partners. The American Sugar Alliance opposes combining trade policy for sugar with other sector’s trade policies, such as ethanol trade policy.”
Evandro Gussi, head of Brazil’s sugar and ethanol lobby group Unica, stated: “For years, Brazil has only been able to export small quotas of sugar to the U.S. due to high tariffs.” Gussi also criticized the U.S. complaints about Brazil’s ethanol tariff, arguing that Brazilian and U.S. ethanol are “different products” due to their sustainability profiles. But Johansson, disagrees, noting that last year Brazil exported more than 1.3 million metric tons of sugar to the U.S. making Brazil the largest foreign supplier of sugar to the United States.
Brazil’s stance on negotiations. Brazilian officials appear to be using the sugar market access issue as leverage in any potential negotiations over ethanol tariffs. They are emphasizing the need for a comprehensive approach that considers both ethanol and sugar trade between the two countries. By highlighting the disparity in sugar market access, Brazil is attempting to counter the U.S. narrative of unfair trade practices and push for a more balanced discussion of agricultural trade between the two nations.
Of note: Brazil’s sugar tariffs are 14.4% at the WTO applied MFN duty level up to 35% at the bound rate, which compares to the U.S. in-quota duty of 5.7% and out-of-quota duty of 15.36 cents per lb.
Brazil does import sugar, despite being the world’s largest sugar exporter. According to the United Nations COMTRADE database, Brazil imported sugars and sugar confectionery worth $134.19 million in 2023. This import figure is relatively small compared to Brazil’s massive sugar exports, which reached billions of dollars in the same year — In 2023, Brazil exported $16.2 billion worth of raw sugar, making it the world’s largest exporter of this commodity.
Brazil’s sugar imports can be attributed to several factors:
- Specific product needs: Brazil might import certain specialized sugar products or confectioneries that are not produced domestically.
- Regional demand: Some regions in Brazil may find it more economical to import sugar from neighboring countries due to transportation costs or local shortages.
- Market dynamics: Despite being a major producer, Brazil participates in global sugar trade, which sometimes involves importing to meet specific market demands or to fulfill trade agreements.
While Brazil does import some sugar, it remains a net exporter with a significant trade surplus in the sugar sector. The country’s sugar exports far outweigh its imports, with Brazil being a crucial supplier to many countries worldwide, including China, Algeria, Nigeria, Morocco, and Canada, among others.
The main countries Brazil imported sugar from in 2023 were:
- United States ($2.91 million)
- Ghana ($533,000)
- Guatemala ($249,000)
- Italy ($241,000)
- Germany ($168,000)
Of note: Brazil has free trade agreements with some countries, which may affect sugar tariffs.
Brazil’s sugar tariffs have minimal impact on its competitiveness in the global sugar market. In fact, Brazil’s position as the world’s largest sugar producer and exporter is largely unaffected by its tariff structure. How Brazil’s sugar tariffs relate to its global competitiveness:
Tariff Structure and Its Impact
- Mercosur Common Market external tariff: Brazil, as a member of Mercosur (Southern Common Market), applies a 16% Common External Tariff on sugar imports from non-Mercosur countries.
- Limited effect on competitiveness: Despite this tariff, Brazil’s sugar industry remains highly competitive globally. The country accounts for 45% of global sugar trade, demonstrating its dominant position.
- Domestic market protection: The tariff primarily serves to protect the domestic market as part of Mercosur’s trade policy, rather than to enhance Brazil’s global competitiveness.
Brazil’s competitive advantages. Brazil’s sugar industry competitiveness stems from several factors beyond tariffs:
- Efficient production: Brazil is considered the world’s most cost-efficient producer of sugar.
- Scale of production: In 2023, Brazil’s sugarcane crop reached 661.4 million metric tons, a 6.5% increase from the previous year.
- Export dominance: Brazil exported about 28 million metric tons of sugar in 2022, which is 17 million metric tons more than the next largest exporter, Thailand.
- Low government support: According to the OECD, Brazil’s producer support as a share of gross farm receipts fell from 7.6% to 1.7% between 2000-02 and 2017-19, well below OECD averages.
Market Liberalization and Competitiveness
- Historical context: Governmental control mechanisms in the domestic sugar market ceased at the end of the 1990s.
- Free market operations: For over two decades, Brazil has been operating in a free market environment for sugar.
- Increased market share: Brazil’s market share in sugar exports soared from 10% in the 1990s to an average of 40-45% over the past decade.
Global Market Position
- Export leadership: Brazil dominates the sugar export market, with exports significantly higher than other major producers.
- Future projections: Brazil is expected to maintain 37% of the world’s sugarcane production by 2031.
- Market size: The Brazil cane sugar market size reached $23.99 billion in 2023 and is projected to grow at a CAGR of 2.91% to reach $30.72 billion by 2032.
Subsidies & Supports
- Brazil provides a number of subsidies and supports to its sugar and ethanol industries and does not meet the same level of environmental, labor, and food quality standards as required by countries like the United States (see link to ASA study at https://sugaralliance.org/wp-content/uploads/2021/01/gov-support_brazil.pdf).
Upshot: Brazil says its sugar tariffs play a minimal role in its global competitiveness. The country’s dominance in the global sugar market is primarily due to its efficient production methods, vast arable land, favorable climate, and advanced agricultural technologies. These factors, combined with Brazil’s scale of production and export capabilities, far outweigh the impact of its import tariffs on its competitive position in the global sugar market. But U.S. interests continue to note subsidies and other nontariff trade barriers are hurdles in entering the Brazilian market.
Caveats. Any U.S. negotiation with Brazil must be looked at through the lens of what is going on relative to former PresidentBolsonaro, a close ally of President Trump. Brazilian authorities have accused Bolsonaro of plotting a potential coup after his failed 2022 reelection bid. (Brazil’s prosecutor-general said Tuesday that former Brazilian President Jair Bolsonaro knew and agreed to a plan to poison his successor and current President Luiz Inácio Lula da Silva as part of an attempted coup to remain in power.)
The relationship also must be looked at relative to Brazil’s growing relationship with China. China has cemented itself as Brazil’s largest trading partner. Chinese investments in Brazil, particularly in energy and infrastructure, have surged over the past decade. While Brazil hasn’t officially joined China’s Belt and Road Initiative, there’s increasing pressure and potential benefits for Brazil to do so. Brazil’s President Lula has maintained a careful approach, strengthening ties with China without alienating the United States.
Bottom line: Any U.S. negotiation with Brazil must carefully balance these complex factors. The ongoing situation with Bolsonaro and Brazil’s strengthening ties with China will likely influence the tone, scope, and outcomes of any potential broader deal between the two nations.