25/04/03
New tariffs could upend US tallow imports
New York, 3 April (Argus) — New US tariffs on nearly all foreign products could
deter further imports of beef tallow, a fast-rising biofuel feedstock and food
ingredient that had until now largely evaded President Donald Trump's efforts to
reshape global trade. Tallow was the most used feedstock for US biomass-based
diesel production in January for the first month ever, with consumption by pound
rising month to month despite sharp declines in actual biorefining and in use of
competing feedstocks. The beef byproduct benefits from US policies, including a
new federal tax credit known as "45Z", that offer greater subsidies to fuel
derived from waste than fuel derived from first-generation crops. Much of that
tallow is sourced domestically, but the US also imported more than 880,000t of
tallow last year, up 29pc from just two years earlier. The majority of those
imports last year came from Brazil, which until now has faced a small 0.43¢/kg
(19.5¢/lb) tariff, and from Australia, which was exempt from any tallow-specific
tariffs under a free trade agreement with US. But starting on 5 April, both
countries will be subject to at least the new 10pc charge on foreign imports.
There are some carveouts from tariffs for certain energy products, but animal
fats are not included. Some other major suppliers — like Argentina, Uruguay, and
New Zealand — will soon have new tariffs in place too, although tallow from
Canada is for now unaffected because it is covered by the US-Mexico-Canada free
trade agreement. Brazil tallow shipments to the US totaled around 300,000t in
2024, marking an all-time high, but tallow shipments during the fourth quarter
of 2024 fell under the 2023 levels as uncertainty about future tax policy slowed
buying interest. Feedstock demand in general in the US has remained muted to
start this year because of poor biofuel production margins, and that has
extended to global tallow flows. Tallow suppliers in Brazil for instance were
already experiencing decreased interest from US producers before tariffs. Brazil
tallow prices for export last closed at $1,080/t on 28 March, rising about 4pc
year-to-date amid support from the 45Z guidance and aid from Brazil's growing
biodiesel industry, which is paying a hefty premium for tallow compared to
exports. While the large majority of Brazilian tallow exports end up in the US,
Australian suppliers have more flexibility and could send more volume to
Singapore instead if tariffs deter US buyers. Export prices out of Australia
peaked this year at $1,185/t on 4 March but have since trended lower to last
close at $1,050/t on 1 April. In general, market participants say international
tallow suppliers would have to drop offers to keep trade flows intact. Other
policy shifts affect flows Even as US farm groups clamored for more muscular
foreign feedstock limits over much of the last year, tallow had until now
largely dodged any significant restrictions. Recent US guidance around 45Z
treats all tallow, whether produced in the US or shipped long distances to reach
the US, the same. Other foreign feedstocks were treated more harshly, with the
same guidance providing no pathway at all for road fuels from foreign used
cooking oil and also pinning the carbon intensity of canola oil — largely from
Canada — as generally too high to claim any subsidy. But tariffs on major
suppliers of tallow to the US, and the threat of additional charges if countries
retaliate, could give refiners pause. Demand could rise for domestic animal fats
or alternatively for domestic vegetable oils that can also be refined into fuel,
especially if retaliatory tariffs cut off global markets for US farm products
like soybean oil. There is also risk if Republicans in the Trump administration
or Congress reshape rules around 45Z to penalize foreign feedstocks. At the same
time, a minimum 10pc charge for tallow outside North America is a more
manageable price to pay compared to other feedstocks — including a collection of
charges amounting to a possible 69.5pc tax on Chinese used cooking oil. And if
the US sets biofuel blend mandates as high as some oil and farm groups are
pushing , strong demand could leave producers with little choice but to continue
importing at least some feedstock from abroad to continue making fuel. Not all
US renewable diesel producers will be equally impacted by tariffs either.
Diamond Green Diesel operates Gulf Coast biorefineries in foreign-trade zones,
which allow companies to avoid tariffs on foreign inputs for products that are
ultimately exported. Biofuel producers in these zones could theoretically refine
foreign tallow, claim a 45Z subsidy, and avoid feedstock tariffs as long as they
ship the fuel abroad. Jurisdictions like the EU and UK, where sustainable
aviation fuel mandates took effect this year, are attractive destinations. And
there is still strong demand from the US food sector, with edible tallow prices
in Chicago up 18pc so far this year. Trump allies, including his top health
official, have pushed tallow as an alternative to seed oils. By Cole Martin and
Jamuna Gautam Send comments and request more information at
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