Late last week, the US Supreme Court struck down the Trump administration’s use of emergency powers under the International Emergency Economic Powers Act (IEEPA) to impose broad tariffs.
Few industries have felt the impact of these tariffs as directly as biofuels and feedstocks.
From used cooking oil (UCO) to vegetable oils and other low-carbon inputs, international trade dynamics have been deeply altered by rounds of punitive tariffs.
For commodity markets including grains, oilseeds, and renewable feedstocks, the ruling represents more than a legal development. It has the potential to reshape trade flows, pricing structures, and margin expectations.
Now, markets are reassessing what comes next.
The Supreme Court ruled against the Trump administration’s use of IEEPA emergency authority to implement sweeping tariffs, effectively rejecting the legal basis for them.
In the immediate aftermath:
However, the situation remains fluid.
The Trump administration has signaled that it is exploring alternative legal mechanisms to maintain or reinstate tariff structures. Within days of the ruling, new tariff proposals surfaced, suggesting that while this specific pathway has been blocked, broader trade protection measures are not necessarily off the table.
In short, the legal authority changed, but the political positioning for tariffs may not have. This distinction matters for markets that depend heavily on international feedstock flows.
In short, the legal authority changed, but the political positioning for tariffs may not have.
One of the most significant tariff impacts in recent years has been on Chinese UCO exports to the United States.
At points, US tariffs on Chinese goods briefly reached 145%, effectively collapsing Chinese UCO shipments to the US and redirecting those volumes elsewhere (especially toward Canada).
If punitive tariffs are rolled back or successfully legally challenged, Chinese UCO could once again become economically viable for US buyers. This would likely increase feedstock availability, impacting domestic prices while reshaping trade arbitrage.
However, non-USMCA (US, Mexico, Canada) feedstocks remain ineligible for 45Z payments. So even if tariffs fall, the 45Z structure still limits the full economic participation of some imported feedstocks.
The interplay between tariff policy and 45Z eligibility will therefore be critical.
Tariffs have effectively insulated certain segments of the US feedstock market.
With Chinese imports constrained:
If tariff pressure eases, additional import competition could temper feedstock premiums. This comes alongside a market already balancing 45Z, RFS, and SAF-driven demand.
Of course, markets do not adjust instantly. Supply chains that were redirected over multiple years will not immediately revert. Trade relationships, compliance structures, and contracting mechanisms have evolved in response to actual circumstances.
Tariffs have contributed to margin unpredictability in US renewable diesel and biodiesel production. Sudden changes in import costs ripple directly into crush spreads and feedstock procurement strategies.
A more stable tariff environment could improve multiple factors, including margin modeling, strategy planning, and arbitrage clarity.
However, if the administration successfully reinstates tariffs through alternative legal channels, the market could experience renewed volatility.
Therefore for producers, the key issue is not just tariff levels; it is policy durability.
The Supreme Court ruling introduces potential changes to import economics, but 45Z introduces its own constraints.
Under 45Z rules:
Even if tariffs fall, imported feedstocks outside USMCA may remain less attractive under the current credit regime.
The result is a layered policy environment:
Together, these factors all shape the true margin equation.
The immediate impact of this ruling is, perhaps unsurprisingly, more volatility.
While the Supreme Court decision removes one legal mechanism for tariffs, the administration has already indicated it may pursue alternative authority to maintain protectionist measures.
Markets now face multiple possible scenarios:
Each scenario carries different implications for elements such as UCO trade routes, vegetable oil pricing, and renewable diesel margins. And even in the absence of tariffs, broader geopolitical trade tensions remain a structural factor in global feedstock flows.
In other words, uncertainty has not disappeared; it has shifted.
The Supreme Court struck down the use of IEEPA emergency powers for broad tariffs, but alternative trade measures are already being explored. Policy volatility has shifted, not disappeared.
If punitive tariffs are rolled back, previously constrained Chinese used cooking oil (UCO) exports could become economically viable again. This would increase feedstock availability and reshape arbitrage patterns.
Tariffs helped insulate US feedstock markets. Easing trade barriers could soften UCO and vegetable oil premiums, particularly in a market already balancing 45Z and RFS dynamics.
A durable reduction in tariffs would support better forward margin modeling for renewable diesel and biodiesel producers. However, reinstated or restructured tariffs could quickly renew volatility.
Even if tariffs fall, non-USMCA feedstocks remain ineligible under 45Z. Tariff economics and tax credit eligibility must be analyzed together.
Tariffs affect overall cost.
45Z affects credit value.
RFS affects demand pull.
Together, these layers determine true competitiveness.
Capital allocation, procurement strategies, and trading decisions will remain cautious until markets gain clarity on the durability of US trade policy.
The Supreme Court’s decision represents a meaningful shift in US trade policy mechanics. But it does not eliminate tariff risk from the biofuels equation.
For feedstock markets that have already absorbed years of trade distortions, the potential reopening of certain flows like Chinese UCO could rebalance supply dynamics. At the same time, 45Z eligibility constraints and ongoing RFS developments continue to anchor domestic market structure.
The biofuels industry now faces a familiar challenge. How can the market make capital, procurement, and trading decisions in an environment with so many policy variables?
Tariffs may rise again. Trade flows may redirect to different pathways. Margins could even be repriced once more.
What remains constant is the need to understand how policy layers interact collectively. In a market where feedstock costs drive competitiveness, those interactions matter more than ever.