By: C. Oldfield
Brazil charges high import tariffs on imported goods, one such good being ethanol. Recently U.S President Trump has threatened Brazil with commercial repercussions if they do not lower the tax on American Ethanol. Trump has stated that he will not continue to allow these high tariffs, while governmental officers in Brazil work hard to find out a compromise that works in both country’s favor.
The current US stance on commerce seems to be surrounded around reciprocal deals, where the US refuses to be taken advantage of due to its larger size and giant economy. The US government is going through its trade agreement and revising those that do not favor the US, and the next one found has been the Brazilian tariffs on American Ethanol.
So, what is the solution? So far, the compromise seems to be that, Brazil will lower the tariffs on American Ethanol, and in exchange, the US will lower tariffs on Brazilian Sugar Cane, which allows Brazil's sugar cane to be competitive in the US markets.
What will the effect of this agreement be? This agreement seems to boost the American Ethanol market while also, temporarily destabilizing the Brazilian pricing. It will likely mean that the price of Ethanol in Brazil, in general, in lowered. And on the other hand, the reduction in the Sugar Cane quota, means that one of Brazil's major sources of income will be boosted greatly.