Triple-digit tariff increases on each other’s imports, if sustained, are set to reshape U.S.-China trade – particularly for agricultural products, where price competition is fierce. U.S. farmers hope the high tariffs offer new opportunities in domestic biofuel that can at least soften the tariff blow, but much will depend on the policy signals from Washington, analysts say.
China’s retaliatory tariffs went into effect Saturday, subjecting U.S. imports to a 125% duty. The U.S. has imposed additional tariffs worth 145% on almost all imports from China since President Donald Trump took office. The scale of the new duties, coupled with South America’s ability to expand acreage for many crops, prompts fears of sharp export losses for U.S. commodities.
For soybean farmers, who rely on China for half their exports, finding buyers to replace Chinese volume won’t be easy. But new duties on Chinese imports might leave biofuel producers looking for new feedstock sources, offering a lifeline just as producers are looking for new markets.
“The domestic biofuel market is one area that makes a lot of sense to look at for some offset from some of the trade issues,” Scott Gerlt, chief economist at the American Soybean Association, told Agri-Pulse. “When we've seen tariff levels go up, typically, that has been beneficial for soybean oil prices.”
Scott Gerlt (American Soybean Association photo)The U.S. imported about 200,000 metric tons of used cooking oil (UCO) a month in 2024 on average. The bulk of it came from China, according to the Energy Information Administration. China accounts for half of all lipid biofuel feedstock imports, according to Stillwater Associates, an energy consulting firm. But with 145% additional duties, these Chinese feedstocks are set to become less attractive.
Who benefits?
A primary driver of the attractiveness of UCO and tallow imports has been how state low carbon fuel standards incentivize those feedstocks through a higher carbon intensity score. This historically has translated to higher credit value for the producers.
But even in an environment where carbon intensity is highly valued, Chris Efird, co-founder and CEO of NEXT Renewable Fuels, told Agri-Pulse, 145% could be too steep a price.
Airlines that have previously insisted that their sustainable aviation fuel (SAF) does not contain virgin vegetable oils are reconsidering their stances in the face of 145% tariffs, Efird said.
“I have noticed in the last probably six weeks, in conversations with airlines, that they are backing off of those pledges,” Efird said. “You can tell there's definitely some conversations internally about, ‘Hey, is this a hill we're willing to die on because it may mean we get no SAF,'” he added.
Geoff Cooper, president and CEO of the Renewable Fuels Association, argued that the industry movements could present an opening for domestic feedstocks and U.S. farmers.
“We see the tariffs that the Trump administration has imposed on China as the final nail in the coffin for used cooking oil imports,” said Cooper.
Geoff Cooper (Renewable Fuels Association photo)But even if used cooking oil from China loses its sheen for airlines and biofuel producers, soy oil may not be second in line for many biofuel producers. Efird said he would put his efforts into securing domestic tallow and used cooking oil where possible.
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A quarter of all U.S. oil used in food production is collected as used cooking oil, suggesting there is some room for growth, according to GlobalData Agri, an agricultural analytics firm.
Once domestic lipid feedstocks run dry, Efird said, he would turn to distillers corn oil, corn and, finally, soybean oil.
Soy “is a very good feedstock,” he said, “but it is a high carbon intensity feedstock.”
Other imported waste feedstocks are set to compete with soybeans and other seed oils. There’s been a recent uptick in tallow imports from Australia and South America, says an industry source.
There are also ways Chinese exporters and U.S. fuel producers could get around the new tariffs.
One industry source said even before the latest trade escalation, companies have been using foreign trade zones within the U.S. to avoid tariffs on UCO. Specifically designated FTZs allow importers to avoid paying duties on inputs for products produced for export. If companies import feedstocks, produce biofuels and export them all within the FTZ, the products never clear customs and are not subject to U.S. tariffs.
UCO and tallow imports are still expected to be favored over domestic ag-based feedstocks, even with the tariffs, according to the industry source. Domestic producers, however, are hoping that policy shifts in Washington could bolster ag-based feedstocks’ attractiveness.
Washington to the rescue?
There are several policy levers lawmakers can pull to help domestic soy producers weather tariff shocks, Gerlt said. Policymakers could revisit the credit amount awarded to biofuel producers that use soybeans under the Inflation Reduction Act’s 45Z tax credit. The tax credit awards soybean oil a less favorable carbon intensity score than many other feedstocks, in part, because of inputs and land required to grow the crop.
Industry groups, including ASA, have argued that the calculations are flawed given their reliance on historical industry averages.
“It takes a big indirect land use hit in its modeling, which I frankly don't believe is accurate,” Efird said.
Even before the tariff announcement, there were concerns from the industry and the government that China could essentially re-route UCO shipments, Cooper said. An easy fix for this would be making all UCO imports ineligible as a feedstock under 45Z.
This was included in a notice of intent to propose guidance the Biden administration Treasury Department released in January. In comments to that filing, groups have pushed Trump's Treasury to maintain the concept of effectively eliminating imported UCO feedstock pathways.
Lawmakers have picked up on some of these concerns. Recently, a bipartisan coalition re-introduced a bill to restrict 45Z eligibility to fuel from domestic feedstocks. The bill also would exclude emissions attributed to indirect land use change from lifecycle emissions calculations.
Gerlt is eying the upcoming budget reconciliation bill as an opportunity for lawmakers to address some of the tax credit’s shortcomings.
The Environmental Protection Agency can also set higher renewable volume obligations – which set the volume of renewable fuels that must be blended into U.S. gasoline and diesel supplies.
The agency is in the process of deciding RVOs for 2026-2028. Industry groups are pushing for higher RVOs that would better reflect the industry’s capacity.
“In January, biodiesel plants ran at about 40% capacity,” Gerlt said. “So, domestic soybean oil use has just plummeted this year due to that.”
Gerlt argued that higher RVO levels would provide the market certainty needed to spur domestic demand for soybean oil.
Owen Wagner (Rabobank photo)Setting higher RVOs for advanced biofuels could incentivize use of domestic ag-based feedstocks first, with the balance supplemented by imports, an industry source argues. Setting the levels too low solely encourages the imports that also benefit from other incentive programs, where they have a premium.
Owen Wagner, senior grains and oilseed analyst at Rabobank, argued that overall, crop producers will find plenty of reasons for optimism in the biofuel sector.
“We’ve got the volume” to increase demand for domestic feedstocks, he said, and that volume is set to grow. California’s Air Resources Board has set lofty emissions reduction goals to reduce carbon intensity of the state’s transportation sector by 90% by 2045 and 30% by 2030, Wagner said.
“Biodiesel plays very well in this sort of 20 to 40% reduction range,” Wagner said.
“It's now all the more realistic for soybean oil to fulfill maybe some of that volume that could be lost by UCO if it's boxed out of the market,” Wagner said.
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