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Key takeaways:
The US Trade Representative’s (USTR) final report will only be released on July 15, and bilateral negotiations will take place in the coming weeks, which could reduce the effective tariff rate, according to sources heard by Fastmarkets.
Section 301 empowers the USTR to investigate and propose retaliatory tariffs on foreign governments whose policies and trade practices are deemed unfair, and according to the report, Brazil would be actionable in several different areas, including digital trade and electronic payment systems; preferential import tariffs for Mexican and Indian goods; insufficient/ineffective anti-corruption enforcement; intellectual property protection; illegal deforestation; and unfair ethanol trade policies.
The report, however, sets forth an extensive list of items exempted from the proposed tariffs that include some of the most important items in the bilateral trade agenda. Those go from aircraft parts to fossil fuels, coffee, tropical fruits and pulp items.
The exemption list is very similar to the one defined in November 2025 excluding key Brazilian export items from the 40% tariffs that had been imposed under the International Emergency Economic Powers Act (IEEPA) and that were later ruled down by the US Supreme Court in February 2026.
In parallel to Section 301, the US currently maintains a tariff on Brazilian imports under Section 122, which imposes a 10% duty on all goods imported from Brazil. The measure came into effect on February 24, after the US Supreme Court struck down the reciprocal tariffs imposed by President Trump on hundreds of countries. Section 122 is set to remain in force until July 24, although the US administration may seek Congressional approval for a potential extension.
Between July 15 and July 24, there is a period of regulatory uncertainty, as it remains unclear whether any tariff imposed under Section 301 would be added on top of the existing Section 122 tariff or whether the two measures would be mutually exclusive.
Traditionally, the US Customs and Border Protection (CBP) agency publishes detailed implementation guidance several days after the government announces new tariff measures. This guidance typically clarifies operational aspects such as whether tariffs are cumulative or substitutive, as well as the scope of any exemptions and exclusions.
According to initial economists’ estimates published in local news outlets, the measure as outlined in the USTR report would impact less than 30% of Brazil’s exports to the US, with a strong bias to industrialized products such as equipment and machinery.
Potential market impacts vary across industries, and Fastmarkets has spoken to market participants to understand what is at stake.
In 2025, when the IEEPA tariffs were imposed on Brazilian goods, most of the key agriculture and livestock items in the Brazil-US export agenda were later exempted, including coffee, meat, fruit juice, tropical fruits and nuts — items also exempted from USTR’s Section 301 report.
Some of the agriculture and livestock items most-impacted by IEEPA in 2025 included fish, beef tallow and ethanol, items that once again are absent from the exemption list.
Fish
Fish is not included in the USTR’s exemption list, similar to what happened with IEEPA. In 2025, after the IEEPA tariffs were enforced in August, Brazil’s fish exports to the US plummeted by 61% in the last four months of the year, from 2,586 tonnes in 2024 to 1,603 tonnes.
The US is the main destination for Brazil’s fish, having secured 74.4% of the country’s total exports in 2024, 58.4% in 2025 (impacted by the tariffs), and 72.5% of 2026 shipments between January and April.
Despite the potential impact on Brazil’s fish industry, brokers and traders disclosed conflicting views as to how it could affect upstream animal feed markets.
While some said that in 2025 Brazilian animal feed markets did not suffer significant impacts against the backdrop of the IEEPA tariffs, another market participant said the latest tariff increase could still weigh on trade flows, recalling that previous hikes, particularly the jump to 50%, led to contract cancellations, adding that while the market had been working with a 10% tariff, a rise to 25% would likely have some impact.
The source also noted that it is too early to gauge the full effect of the announcement, saying market participants are currently on wait-and-see mode across both meals and fats markets.
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Ethanol
Ethanol, one of the key items cited in the USTR’s report as a reason for imposing additional tariffs on Brazil, also faced strong headwinds with the IEEPA tariffs in 2025. Exports to the US between September and December plummeted by 89.9% to only 5,693 tonnes in 2025, from 56,307 tonnes in 2024.
The US is also a key destination for Brazil’s ethanol, representing about 16% of Brazil’s total exports in 2024 and 2025. Between January and April 2026, shipments to the North American country represent 24% of Brazil’s total volumes.
According to market sources heard by Fastmarkets, the additional tariffs on the ethanol market could cap export opportunities ahead, but current prices are already not competitive into the US, so near-term impacts should be limited.
One source heard by Fastmarkets said they believe the most detrimental outlook would be if both countries initiated discussions regarding import tariffs — Brazil currently imposes an 18% import on US ethanol — which could lead to commercial uncertainty.
Most sources heard by Fastmarkets, however, reiterated that the negotiations will unfold over the coming days and that it is still early to draw any final conclusions.
The tariff applied by Brazil to imported ethanol follows the Mercosur Common External Tariff and “does not constitute a measure specifically directed at the United States,” the Brazilian Sugarcane and Bioenergy Industry Association (UNICA) and Bioenergia Brasil said in a statement sent to Fastmarkets.
UNICA and Bioenergia Brasil also said that Brazilian ethanol is recognized internationally as one of the most efficient solutions for transportation decarbonization and reaffirmed their confidence “that the Brazilian government will continue to conduct this process with responsibility, firmness, and diplomatic competence, in defense of the country’s strategic interests.”
Brazil’s National Union for Corn Ethanol (UNEM) did not reply to Fastmarkets’ request for comment on the potential impacts on the corn-ethanol market by the time of publication.
Tallow, beef
One of the most important items exported by Brazil to the US, beef was included in the list of products exempt from the proposed tariff, although bovine byproducts such as tallow were not. Brazilian beef had already been exempted from the additional 40% tariff imposed on the country in November last year, following rounds of negotiations between the two countries.
The US was the second-largest destination for Brazilian beef between January and April this year, with shipments totaling 124,553 tonnes, ranking behind only China. This volume accounted for 13% of Brazil’s total beef exports.
Meanwhile, the impact of a potential 25% tariff on Brazilian tallow has not raised immediate concerns among some exporters, who were already expecting a review under Section 301 to suggest a new import tariff to replace the current 10% set to expire on July 25.
Market participants said they expect the tariff could still be reduced following negotiations between the US and Brazil, including public hearings.
“The worst-case scenario would be an additional 15 percentage points on top of the current 10% tariff. It is still early to say, but this would be positive news compared with the previous 50% tariff,” a source told Fastmarkets.
Brazilian tallow, one of the agricultural products most exposed to the US market, was severely affected by the 50% tariff introduced on August 1 last year, when export volumes declined sharply.
Shipments of Brazilian tallow to the US recovered strongly from March, after the US tariff was reduced from 50% to a temporary 10% global tariff. In March alone, the US accounted for 98.5% of Brazil’s total tallow exports, which reached 35,943 tonnes.
“A 25% US tariff would not necessarily prevent deals with the US, given the open arbitrage between the two markets for tallow,” a market participant said.
According to Fastmarkets’ assessments, tallow on a delivered US Gulf basis was commanding a $553 per tonne premium to Brazilian FOB export prices as of Thursday May 28, a spread wide enough to absorb freight rates, the additional tariffs and the price difference linked to foreign feedstocks not being eligible for 45Z tax credits under US biofuel policies.
Export negotiations between Brazil and the US for July shipment were ongoing last week, with bids reported to Fastmarkets around $1,400 per tonne.
“US buyers will likely need to lower their bids from now on, although it is still unclear to what extent,” another source said.
A market participant said export margins remain positive and could absorb a potential 25% tariff, but added that traders may use the measure to pressure domestic prices lower, weighing on FOB price indications.
“With current refinery margins in the US, we are unlikely to see a significant decline in Brazilian tallow exports in the near term,” another market source told Fastmarkets.
For the forestry sector, various pulp fiber grades, including hardwood, softwood and fluff pulp, were included in the exemption list and therefore will not be subject to the tariffs proposed by the US government.
By contrast, the main paper grades exported by Brazil, such as tissue products used for hygiene purposes, printing and writing papers, and packaging papers, will be subject to the proposed 25% tariff.
In August 2025, after Brazilian paper products were hit by 50% tariffs imposed under the IEEPA, shipments to the US of all paper types subject to the measure virtually came to a halt, and the products were redirected to Latin America and Europe. Sources linked to the paper sector said that even a 25% tariff makes shipments to the US unviable, forcing companies to seek alternative solutions outside the US market.
In the wood products segment, most Brazilian exports shipped to the US would be affected by the USTR’s proposed measures, although a limited number of products are included in the exemption list. The sector also faces regulatory uncertainty due to the risk of overlapping US trade measures, as some Brazilian wood products are already subject to tariff under Section 232.
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For the aluminium sector, the proposed Section 301 action explicitly excludes products already subject to Section 232 tariffs. As a result, aluminium products covered by the existing Section 232 regime would not be subject to the additional 25% tariff proposed on Brazilian imports.
The proposed Section 301 action also excludes a range of rare earth products and critical minerals from the additional 25% tariff. The exclusion list includes rare earth metals, scandium, yttrium, rare earth oxides and compounds, as well as strategic materials such as lithium, cobalt, nickel, niobium, tungsten and vanadium.
The same applies in the case of steel, already under Section 232 with a 50% tariff since June 2025 and therefore excluded from Section 301.
Since then, in a year-on-year comparison, when the first stage of the tariff was imposed in March 2025 — at that time still 25% — Brazilian steel imports into the US fell by 8.3%, according to a study published by the International Business Center of the Federation of Industries of the State of Minas Gerais.
Even so, semi-finished products, ingots and other primary forms of iron or steel remain the main Brazilian export product to the US, accounting for 9.2% of the total, according to Comex Stat data.
The Brazilian machinery and equipment sector, nevertheless, which is heavily dependent on steel, is included in the new 25% tariff list, which has already prompted a reaction from the Brazilian Machinery and Equipment Association (Abimaq).
Despite the sector already factoring in the possibility of US tariffs between 20% and 30%, Abimaq stated that it will participate in the public consultation and hearing process ahead of the final decision on the measures, submitting technical contributions to demonstrate the strategic importance of bilateral trade in machinery and equipment for both the Brazilian and US economies.
Separately, a new US presidential proclamation modified certain aspects of the Section 232 aluminium, steel and copper regime by lowering the domestic content threshold from 95% to 85%.
Still according to the proclamation, tariffs on agricultural equipment, such as combines and harvesters, have been adjusted from 25% to 15% in products from any origins. In addition, it expands the existing category of industrial equipment subject to a 15% tariff to include mobile industrial equipment, such as bulldozers and forklifts, when imported from trade agreement countries that are eligible for such treatment.
The proclamation also encourages foreign companies to use more US steel and aluminium by allowing them to qualify for a 10% duty rate if their equipment includes at least 85% US-melted and poured steel or smelted and cast aluminium by weight.
This article contains additional reporting by Helena Benfica.