Understanding the Impact of US Tariffs on Brazilian Tallow Exports
The international tallow market is experiencing a significant transformation following the announcement of substantial US tariffs on Brazilian imports. This development has sent ripples through global biofuel supply chains and forced Brazilian exporters to rapidly reconsider their market strategies. This analysis examines the multifaceted impact of these tariffs and explores the emerging alternatives for one of Brazil's most valuable agricultural exports.
What Are the Recent US Tariffs on Brazilian Tallow?
Overview of the Tariff Implementation
The tallow market faced a dramatic shift when US President Donald Trump announced a 50% tariff on all Brazilian goods on July 9, 2025. Set to take effect on August 1, 2025, this comprehensive tariff includes tallow—a critical feedstock for biofuel production in the United States. The announcement came with explicit warnings that any attempts to circumvent these tariffs through transshipment would face even higher rates, effectively closing potential loopholes.
The tariff implementation represents a significant policy shift that directly impacts a well-established trade relationship between the two nations. According to Fastmarkets analysis, the timing of the announcement created immediate market uncertainty, as numerous shipments were already en route to US ports when the news broke.
"The tariff announcement created a situation where exporters had to quickly reassess not only future shipments but also cargoes already at sea," noted industry analysts from Fastmarkets in their July 2025 market report.
Historical Trade Relationship Before Tariffs
Prior to the tariff announcement, the United States had been the predominant destination for Brazilian tallow exports, accounting for approximately 97% of Brazil's total tallow exports in 2025. This heavy reliance on a single market underscores the vulnerability now faced by Brazilian exporters.
Brazil's tallow export volume to the US had been robust throughout 2025, averaging 51,000 tonnes monthly during Q2. June 2025 marked a particularly significant period with record-breaking exports of 71,650 tonnes shipped to US-based buyers. These established trade patterns, developed over years of commercial relationships, now face severe disruption.
The historical price stability and logistics efficiency of this trade route had created a deeply interdependent relationship, making the tariff announcement particularly impactful for both nations. Brazilian processors had optimized their production specifically for US market specifications, while US biofuel producers had come to rely on the consistent quality and supply from Brazil.
How Has the Tallow Market Responded to the Tariffs?
Immediate Market Reactions
Following the tariff announcement, the export trading of Brazilian tallow initially came to a complete halt. Market participants from both countries entered a strategic planning phase, focused on mapping alternative approaches to manage the new economic reality.
By late July 2025, activity cautiously resumed with storage tanks at the Port of Santos—Brazil's primary tallow export facility—receiving product for export once again. Approximately 36,000 tonnes were sold for August delivery to US-based buyers, representing a significant decline from pre-tariff volumes but demonstrating continued trade despite the new barriers.
September shipment offers were being presented even as August deliveries were finalized, though market sources indicated that negotiations were expected to be prolonged and complex as both sides adjusted to the new cost structure. This gradual resumption of activity suggests that market participants are finding ways to adapt, albeit with reduced volumes and increased costs.
Price and Supply Chain Disruptions
The tariff implementation has triggered considerable oil price movements and pricing volatility in both Brazilian and US markets. Shipments already en route to the United States during the announcement faced particular uncertainty, with some exporters seeking last-minute diversions to alternative markets.
US domestic biofuel producers have been scrambling to secure alternative feedstock sources, leading to upward price pressure on domestic tallow and competing feedstocks. The reduced Brazilian export volumes are creating potential supply gaps in the US market that domestic production cannot immediately fill.
The disruption has had cascading effects throughout the supply chain:
- Rendering facilities in Brazil are facing storage capacity challenges
- Logistics providers are renegotiating shipping contracts and routes
- Biofuel producers in the US are reassessing production schedules
- End-product prices for biodiesel and renewable diesel face upward pressure
This period of adjustment has created both risks and opportunities for market participants able to navigate the changing landscape effectively.
What Alternative Markets Are Brazilian Exporters Exploring?
Sustainable Aviation Fuel (SAF) Production Route
A creative solution has emerged with US-based Sustainable Aviation Fuel producers becoming a primary outlet for Brazilian tallow despite the tariffs. This approach leverages the duty drawback mechanism available under US customs regulations.
SAF production allows companies to claim reimbursement of up to 99% of tariffs paid when the finished product is subsequently exported. This creates an economically viable pathway for Brazilian tallow to enter the US market, undergo processing, and then leave as a value-added product.
However, this option is limited to exporters with established relationships with the relatively small number of US companies that have established SAF export channels to European markets. The specialized nature of this production path means it cannot absorb the full volume of previous Brazilian tallow exports to the US.
European Market Potential
Europe has been identified as the most likely alternative destination for direct Brazilian tallow exports. According to industry projections, European demand for certified beef tallow for SAF production is expected to grow by an impressive 250% between 2022-2035, creating substantial long-term potential.
Despite this promising outlook, Brazilian exporters face significant barriers to immediate market entry:
- Complex certification requirements with minimum 40-day compliance timelines
- Higher export costs reducing price competitiveness
- Established European supplier relationships limiting market access
- Economic viability challenges compared to the pre-tariff US market
One industry expert familiar with European certification procedures explained: "Certification and export costs are extremely high and undermine the competitiveness of our product. Exporting to Europe does make sense, but if it happens, it will be more due to pressure from the Brazilian side than actual demand from Europe."
Regional Alternatives in South America
In search of more immediate solutions, the Brazilian rendering sector has engaged in high-level meetings with Uruguayan officials to explore regional alternatives. Uruguay already serves as an export route for tallow from Argentina and Paraguay, potentially offering established channels for Brazilian product.
Argentina was also considered as a potential market, but analysis indicated that its domestic market would be overwhelmed by the volume of Brazilian exports, making it an impractical solution for anything beyond small shipments.
Transshipment options through neighboring countries were explicitly rejected by industry leaders due to fraud concerns and the threatened higher tariffs for circumvention attempts. As one source noted, "This would be the same as committing fraud," highlighting the industry's commitment to legitimate market solutions despite the challenging circumstances.
What Are the Duty Drawback Mechanisms Being Utilized?
How the Drawback System Works
The US duty drawback system has emerged as a critical mechanism for mitigating the impact of US tariffs on Canadian industries and Brazilian tallow. This customs provision allows companies to claim reimbursement of up to 99% of tariffs paid when imported materials are used in products that are subsequently exported from the United States.
The process works through the following steps:
- Brazilian tallow is imported into the US with the 50% tariff paid
- The tallow is processed into Sustainable Aviation Fuel or similar products
- The finished product is exported to international markets (primarily Europe)
- The US processor files for duty drawback reimbursement
- After processing and verification, up to 99% of the original tariff is refunded
This creates a legal pathway to significantly reduce the effective tariff rate while maintaining compliance with US customs regulations. SAF producers in particular have been quick to leverage this mechanism, creating a specialized market channel for Brazilian tallow.
Limitations of the Drawback System
While the drawback system offers a valuable tariff mitigation strategy, it comes with significant limitations that prevent it from serving as a complete solution:
- Significant delays in recovering tariff payments, typically several months
- Cash flow requirements limiting participation to companies with strong financial positions
- Specialized knowledge needed for compliance with complex customs procedures
- Limited capacity among qualified SAF exporters with established European distribution
The system also creates a competitive advantage for larger, more financially robust companies that can absorb the tariff costs during the reimbursement waiting period. Smaller processors face disproportionate challenges in utilizing this mechanism effectively, potentially leading to market consolidation over time.
What Are the Long-Term Implications for Global Tallow Markets?
US Market Adjustments
The US domestic biofuels market will continue requiring imported feedstocks despite the tariffs, as domestic production cannot meet current demand levels. This fundamental supply-demand imbalance is likely to drive several market adjustments:
- Potential shift toward alternative suppliers like Australia
- Price increases for domestic US tallow to attract more collection/production
- Biofuel producers advocating for tariff relaxation or targeted exemptions
- Possible technology shifts to accommodate different feedstock profiles
Looking ahead, changes to the 45Z tax credit program starting in 2026 will exclude imported feedstocks from eligibility, creating an additional layer of complexity for market participants planning long-term strategies. This regulatory change, when combined with the US tariffs and inflation, represents a significant reshaping of the US biofuel feedstock landscape.
Global Supply Chain Realignment
The disruption to established trade flows is triggering a broader realignment of global tallow supply chains. Australia is positioned to become a stronger supplier to Asian markets, potentially filling gaps created by shifting trade patterns.
Industry experts have noted that "Australia is expected to become a stronger supplier of animal fats in Asia," indicating a broader geographic rebalancing of the market. However, Brazilian tallow faces challenges in directly competing in these markets, with one source noting that "Brazilian tallow is already uncompetitive [in Southeast Asia] in terms of costs and product quality."
The potential surplus of Australian tallow in Asian markets could occur if US-bound volumes redirect, creating cascading price effects across the region. European certification requirements are simultaneously creating barriers to quick market shifts, slowing the rebalancing process and potentially creating temporary regional surpluses and shortages.
Brazilian Domestic Market Impact
The Brazilian domestic market faces significant changes if export volumes cannot find alternative international destinations:
- Increased domestic supply leading to downward price pressure
- Rendering sector exploring new business relationships and value-added opportunities
- Adaptation period required for establishing new international market channels
- Potential consolidation among smaller producers unable to weather market disruption
Brazilian producers are investing in certification processes despite the costs, recognizing the need for market diversification in the new trade environment. The adaptation period is expected to last 6-12 months as new commercial relationships develop and market participants adjust to the changed economic conditions.
How Are Regulatory Changes Affecting the Biofuels Landscape?
US Policy Changes Beyond Tariffs
The 50% tariff represents just one element of evolving US biofuels policy. The 45Z tax credit program changes starting in 2026 will exclude imported feedstocks from credit eligibility, creating a double challenge for international suppliers to the US market.
Ongoing developments in the Renewable Fuel Standard (RFS) are simultaneously affecting market dynamics, with potential changes to blending requirements and carbon intensity scoring methodologies. The combined impact of tariffs and credit changes is fundamentally reshaping supply chains and investment decisions throughout the sector.
This regulatory evolution creates a complex decision matrix for market participants:
| Regulatory Factor | Current Impact | Future Implications (2026+) |
|---|---|---|
| 50% Tariff | Immediate price pressure; Drawback utilization | Potential for tariff adjustment or expiration |
| 45Z Tax Credit | Currently includes imported feedstock | Will exclude imported feedstock starting 2026 |
| RFS Requirements | Driving demand for all qualifying feedstocks | May shift toward favoring domestic production |
Certification Requirements for International Markets
European markets represent the most promising alternative destination for Brazilian tallow, but they come with extensive certification procedures that create both time and cost barriers:
- European market certification requires a minimum of 40 days for compliance processing
- High costs associated with certification significantly undermine competitiveness
- Many companies currently prefer domestic sales despite slightly lower prices
- Certification complexity creates additional administrative burden
As one industry source explained: "For now, many companies prefer to sell domestically rather than earn slightly more and deal with all the extra work [of certification]." This sentiment highlights how non-tariff barriers can be as significant as direct tariffs in reshaping trade flows.
FAQ About US Tariffs on Brazilian Tallow Exports
Why did the US implement tariffs on Brazilian tallow?
The tariffs are part of a broader 50% duty imposed on all Brazilian imports announced by US President Donald Trump on July 9, 2025. These tariffs were not specifically targeting tallow alone but affect the entire trade relationship between the two countries. The measure impacts a wide range of Brazilian exports to the United States, with tallow being particularly affected due to its significance in the biofuel supply chain.
Can Brazilian exporters legally avoid the tariffs?
Yes, through the US duty drawback mechanism, which allows for reimbursement of up to 99% of tariffs when the imported material is used in products that are subsequently exported. This approach is being utilized particularly by sustainable aviation fuel (SAF) producers who import Brazilian tallow, process it into SAF, and then export the finished fuel to international markets.
While this creates a legal pathway to mitigate tariff impacts, it requires significant cash flow capacity to cover the tariff payments during the several-month reimbursement process, limiting its accessibility to larger, financially robust companies.
What alternative markets exist for Brazilian tallow?
The primary alternatives for Brazilian tallow exporters include:
- European markets: Offering long-term growth potential but with significant certification barriers and higher export costs
- Regional South American markets: Including Uruguay and Argentina, though with limited absorption capacity compared to US volumes
- Domestic Brazilian consumption: Providing immediate sales channels but typically at lower prices than international markets
Each alternative presents unique challenges in terms of price competitiveness, market access requirements, and volume capacity. Brazilian exporters are likely to pursue a diversified approach rather than relying on any single alternative market.
How long might these tariffs remain in place?
The tariffs are set to take effect on August 1, 2025, but their duration remains uncertain. Market participants are monitoring political developments while simultaneously developing both short-term workarounds and long-term alternative market strategies.
The policy could potentially be adjusted based on several factors:
- Bilateral trade negotiations between the US and Brazil
- Changes in US domestic biofuel production capacity
- Evolution of global renewable fuel markets
- Pressure from US biofuel producers facing feedstock shortages
Given this uncertainty, industry participants are developing strategies that can adapt to multiple scenarios, including both the potential continuation and eventual relaxation of the tariff measures.
Further Exploration
Readers interested in learning more about the dynamics of tallow pricing and international trade can explore related market analysis from Fastmarkets, which provides daily price assessments, charts, and forecasts for animal tallow markets.
The unfolding situation with US tariffs on Brazilian tallow represents a case study in how tariffs impact investment markets and how commodities trade volatility can rapidly reshape established market relationships, forcing adaptation throughout global supply chains. According to Reuters, while some Brazilian sectors were excluded from these tariffs, the agricultural sector faces significant challenges ahead. As this situation continues to evolve, market participants who maintain flexibility and diversified strategies are likely to navigate the transition most successfully.
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