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AG POLICY & MARKETS DAILY
TUESDAY, JULY 28, 2026 | SPECIAL REPORT & ANALYSIS
TRADE POLICY | TIER-2 SUGAR IMPORTS
Sugar’s Side Door Stays Open: Tariffs Reroute — but Don’t Stop — Over-Quota Imports
The 50% tariff on Brazil erased its over-quota sugar shipments almost overnight, but rival cane exporters backfilled much of the gap — and with the Tier-2 duty frozen at 15.36 cents per pound since 2000, the arbitrage driving the import surge survives the new Section 301 regime.
Analysis · July 28, 2026
U.S. sugar producers got only partial relief from the 2025 tariff wave. While the 50% IEEPA tariff on Brazil was in force — August 2025 through February 2026 — Brazilian over-quota raw and refined sugar shipments collapsed from 370,188 metric tons a year earlier to just 2,354 metric tons. But over-quota shipments from all other countries jumped 90% over the same months, replacing nearly 40% of Brazil’s lost volume, according to the NDSU Agricultural Trade Monitor released July 28, 2026, by economists Shawn Arita, Ming Wang and Sandro Steinbach of North Dakota State University’s Center for Agricultural Policy and Trade Studies, based on USITC DataWeb customs data and USDA price series.
The lesson from the IEEPA episode: a tariff on one origin reshuffles sourcing rather than closing the channel — and the same dynamic now looms over the new 25% Section 301 tariff on Brazil.
The story in four numbers
Figure 1. Key figures: the frozen 15.36-cent Tier-2 duty, record FY2024 over-quota imports, Brazil’s collapse under the 50% tariff, and estimated producer-revenue losses. Source: NDSU Agricultural Trade Monitor, July 2026.
Brazil exits, its neighbors pour in
Brazil’s raw-sugar shipments fell essentially to zero under the 50% rate — down 303,034 metric tons versus the same months a year earlier. But El Salvador, Guatemala, Argentina and Costa Rica, all facing just 10-15% tariffs, added 156,316 tons between them, offsetting more than half of Brazil’s lost raw volume. Total high-tier entries fell only 9%: more than half of the earlier ordinary volume still entered the market.
Figure 2. Change in over-quota raw sugar shipments, August 2025-February 2026 versus the same months a year earlier. Tariff rates during the window: Brazil 50%; Nicaragua 18%; Costa Rica 15%; all others shown 10%. Source: NDSU using USITC DataWeb.
The backfill was concentrated in raw cane sugar, where alternative suppliers are plentiful. Ordinary refined imports fell across the board — no one replaced Brazil there, and total Tier-2 refined fell by about half. Specialty and organic sugar surged for a quota-related reason: USDA held the FY2026 specialty quota to its WTO minimum of 1,656 metric tons, a 99% cut, pushing organic imports into the high-tier channel where the organic premium dwarfs the 16.21-cent refined duty.
Figure 3. Over-quota imports by product, Brazil versus all other origins, before and during the 50% tariff. Source: NDSU using USITC DataWeb.
A fast-moving tariff timeline
April 2025 — Reciprocal IEEPA tariffs take effect on imports from nearly all trading partners; Brazil at 10%. Shipments continue — July 2025’s pre-tariff rush is among the largest months on record.
August 6, 2025 — A separate action adds 40 percentage points, taking Brazil’s total IEEPA rate to 50%. Brazilian over-quota shipments fall to near zero.
February 20, 2026 — The Supreme Court holds IEEPA did not authorize the tariffs, vacating the 50% Brazil rate and the reciprocal duties.
February 24, 2026 — A temporary 10% Section 122 surcharge takes effect across most suppliers.
July 22, 2026 — A 25% Section 301 tariff on certain Brazilian goods takes effect; sugar is not exempt.
July 24, 2026 — The Section 122 surcharge lapses by operation of law; final forced-labor Section 301 duties of 10-12.5% take effect across 60 economies, with Brazil at 12.5% — stacked with the Section 301 tariff for 37.5% combined.
Where the tariff landscape stands now
| Action | Status | Bearing on Tier-2 sugar |
| Section 122 surcharge (10%) | Effective Feb. 24, 2026; expired July 24, 2026 | Applied broadly across most suppliers; now lapsed. |
| Brazil Section 301 (25%) | Effective July 22, 2026 | Brazilian-origin goods only; sugar is not exempt. |
| Forced-labor Section 301s | Effective July 24, 2026; 10-12.5% across 60 economies | Brazil at 12.5% (37.5% combined); main backfillers — El Salvador, Guatemala, Argentina, Honduras — at 10%. In-quota TRQ sugar exempt; Tier-2 is not. |
| Excess-capacity Section 301s | Investigation phase only (16 economies) | Covers several potential sugar suppliers; no proposed action published to date. |
Table 1. Status of tariff actions bearing on the Tier-2 sugar channel, as of July 24, 2026. Source: Federal Register notices and USTR.
Why the pressure isn’t over
The economics that opened the Tier-2 channel are intact. The U.S.-world raw sugar price spread — recently around 18-22 cents per pound — still clears the cost of shipping over the duty wall for most suppliers, even after the new tariffs. Only Brazil’s combined 37.5% burden pushes its entry cost near the top of the spread. The duty itself is fixed in nominal terms; preserving its original real protection would require about 29.9 cents today, or roughly 33 cents with freight.
Figure 4. Approximate cost of entering the U.S. market over the Tier-2 duty at recent world prices, versus the U.S.-world price spread. Source: NDSU using USDA ERS Sugar and Sweeteners Yearbook Tables.
The stakes for producers are large. NDSU’s earlier modeling estimated excess Tier-2 supply cut the U.S. raw sugar price by 5-8 cents per pound, costing growers roughly $0.9 billion to $1.5 billion a year in the raw segment — up to $1.8 billion including refined-market effects — and lifting stocks-to-use to a near-record 18.9% in 2024/25, well above USDA’s 13.5% target.
Bottom line
The new Section 301 actions should slow over-quota imports more than any single-country measure could — but they land unevenly, with Brazil at a combined 37.5% and the main backfillers at just 10%. With the Tier-2 duty still frozen and the price spread still above the cost of entry, NDSU expects the tariffs to reduce the flow without closing the channel. Watch total over-quota entries across all suppliers — not just Brazil — along with stocks-to-use and the Mexican allocation under the Needs Formula.
Sources: Arita, S., Wang, M., and Steinbach, S. (2026). Tier-2 Sugar Imports under IEEPA & Section 122 and Outlook with New Section 301 Tariffs. NDSU Agricultural Trade Monitor 2026-07, Center for Agricultural Policy and Trade Studies, North Dakota State University, July 28, 2026. Underlying data: USITC DataWeb; USDA ERS Sugar and Sweeteners Yearbook Tables; BLS CPI-U.
AG POLICY & MARKETS DAILY | TRADE POLICY | TIER-2 SUGAR IMPORTS — TUESDAY, JULY 28, 2026
