New tariff policies threaten to reshape international trade in biofuel feedstocks

Recent trade policies enacted by the Trump administration are set to create significant ripple effects across global biodiesel markets, with particular implications for soybean exports, Used Cooking Oil (UCO) imports, and the broader oils and fats industry.

US implements broad tariff strategy against major trading partners

Last week, President Donald Trump unveiled an extensive tariff plan targeting imports from countries worldwide. The policy imposes a baseline 10% tariff on all imports, with specific nations facing significantly higher rates—up to 50% in some cases.

According to the administration, these measures aim to strengthen the US economy, boost domestic production, and protect American jobs. However, industry analysts anticipate substantial disruptions to global supply chains, particularly in the biodiesel sector which relies heavily on international trade in feedstocks.

China-US trade relations deteriorate further

China has been hit with the most severe tariff rate at 54%, prompting swift retaliation. The Chinese government has responded by imposing an additional 34% tariff on US goods, bringing the total tariff on US soybeans to 44%.

This development is particularly concerning for US soybean producers, as China represents their largest export market. The US typically exports nearly 50% of its soybean production—approximately 27 million metric tons (MMT)—to China annually. Market analysts predict this trade conflict could significantly depress US soybean prices and create surplus inventory challenges domestically.

Additionally, the biofuels industry faces a potential feedstock shortage, as the US imported 2.5 MMT of Used Cooking Oil from China in 2024. These imports, critical for meeting renewable fuel production targets, are expected to decline sharply under the new tariff regime.

EU-US relations also under strain

The European Union hasn’t escaped the tariff measures, receiving a 20% tariff on its exports to the US. In response, EU officials have promised retaliatory measures targeting US soybean imports, potentially threatening the 5-6 MMT of soybeans the EU purchases from the US each year.

The European olive oil sector is particularly vulnerable, as it exports approximately 223,000 tons of olive oil to the US annually—representing about one-third of its total olive oil exports. Industry representatives from Spain, Italy, and Greece have expressed serious concerns about their ability to maintain market share under the increased tariff burden.

Market implications for biodiesel industry

These escalating trade tensions create a complex outlook for the biodiesel industry:

  • Feedstock availability: Reduced imports of UCO from China could drive up prices for alternative feedstocks, potentially increasing production costs for US biodiesel manufacturers.
  • Price volatility: Disruptions to established trade flows are expected to create significant price volatility across various oils and fats markets in the coming months.
  • Investment uncertainty: The unpredictable trade environment could delay or discourage new investment in biodiesel production capacity.

Market participants are advised to closely monitor developments as the situation remains highly fluid, with potential for further escalation or negotiated resolutions in the coming weeks.

For a comprehensive analysis and detailed insights into how these trade developments will impact specific segments of the oils and fats markets, refer to the full market intelligence report on the Vesper platform: https://app.vespertool.com/market-analysis/1843?commodity=vegetable-oil