Breaking Down the July 2026 NDSU Agricultural Trade Monitor: Tier-2 Sugar Imports under IEEPA & Section 122 and Outlook with New Section 301 Tariffs

The July 2026 NDSU Agricultural Trade Monitor examines the rapid growth of Tier-2 sugar imports and how recent U.S. tariff actions have affected the volume and sourcing of those imports. Tier-2 sugar refers to over quota sugar that may enter the United States without a quantitative limit after payment of a fixed duty.

The duty on raw cane sugar was set at 15.36 cents per pound in 2000 and has remained unchanged. Because the duty is fixed in nominal terms, inflation has reduced nearly half of its real value. Preserving the protection provided by the original duty would require a rate of approximately 29.9 cents per pound today.

For many years, the duty was high enough to keep Tier-2 imports relatively limited. That changed as the real value of the duty declined and the difference between U.S. and world sugar prices widened. By 2021, the price difference had risen above the cost of paying the duty and transporting the sugar, making over quota imports profitable. Tier-2 imports subsequently increased from 64,000 short tons, raw value, in fiscal year 2018 to a record 1.2 million in fiscal year 2024.

Exhibit 1: The Frozen Tier-2 Duty, the U.S. and World Price Spread, and Over Quota Imports, 2000 to 2026.

Note: The left panel shows the U.S. No. 16 and world No. 11 raw sugar prices, with the U.S. premium shaded. The right panel compares the U.S. and world price gap with the Tier-2 duty plus freight and shows monthly over quota imports. Shipments increase when the price gap moves above the cost of entry.

Source: NDSU using USDA ERS monthly price series and Table 61, U.S. Sugar Imports from All Sources, and BLS CPI U.

The increase in Tier-2 imports changed the balance of the domestic sugar market. Although USDA includes Tier-2 sugar in its Needs Formula and adjusts the amount supplied by Mexico, the U.S. stocks to use ratio still reached a near record 18.9% during the 2024/25 crop year, well above USDA’s 13.5% target.

The additional supply also limited the recovery of U.S. raw sugar prices and displaced sales that otherwise may have gone to domestic producers. Previous NDSU analysis estimated that excess Tier-2 supply reduced the domestic raw sugar price by approximately 5 to 8 cents per pound during fiscal years 2025 and 2026. This translates to an estimated $0.9 billion to $1.5 billion in annual lost producer revenue in the raw sugar segment and as much as $1.8 billion when refined market effects are included.

Brazilian Imports Fell Sharply Under IEEPA Tariffs

In April 2025, reciprocal tariffs imposed under the International Emergency Economic Powers Act took effect on imports from most U.S. trading partners. An additional action increased the tariff on Brazilian goods to 50% in August 2025.

Brazil had recently been the largest source of Tier-2 sugar imports. While shipments continued under the initial 10% tariff, they fell to near zero after the rate increased to 50%.

From August 2025 through February 2026, Brazilian over quota raw and refined sugar shipments totaled only 2,354 metric tons. During the corresponding months a year earlier, those shipments totaled 370,188 metric tons.

Exhibit 2: Brazil’s Over Quota Imports and the Tariff Path.

Note: Monthly Brazilian over quota raw and refined imports are compared with the tariff rate on Brazil. Shipments continued under the 10% rate. After the rate reached 50%, Brazilian raw shipments fell to near zero and remained there through the observed period.

Source: NDSU using USITC DataWeb.

During this period, the U.S. raw sugar price moved above the Tier-2 threshold it had tracked for much of the previous decade, while the domestic stock overhang declined from its peak. These changes coincided with the temporary tariffs rather than a change in the underlying incentive to import sugar.

Other Suppliers Replaced Part of Brazil’s Lost Volume

The steep decline in Brazilian shipments did not produce an equal decline in total Tier-2 imports. Raw cane sugar can be sourced from several countries, allowing other suppliers to increase shipments when the higher tariff made Brazilian sugar less competitive.

During the seven months when the 50% tariff was in effect, over quota shipments from countries other than Brazil increased approximately 90%. These shipments replaced about one third of Brazil’s lost raw and refined volume and more than half of the lost raw sugar volume.

El Salvador, Guatemala, Argentina, and Costa Rica accounted for much of the increase. Together, these four countries added 156,316 metric tons of over quota raw sugar, offsetting more than half of the decline in Brazilian raw sugar shipments.

Exhibit 4: Over Quota Raw Sugar While the 50% Tariff on Brazil Was in Force, August 2025 through February 2026: Brazil Versus Its Cane Competitors.

Note: The post period covers August 2025 through February 2026, when the 50% tariff was in force. The pre period covers the corresponding months a year earlier.

Source: NDSU using USITC DataWeb.

The shift demonstrates that focusing on Brazilian imports alone would overstate the reduction in sugar reaching the United States. The effects of tariffs must instead be evaluated using total Tier-2 imports across all suppliers.

Raw and refined sugar also responded differently. Other countries increased raw sugar shipments after Brazilian imports declined, but the same replacement did not occur in ordinary refined sugar. Refined imports from most other origins also contracted, causing total Tier-2 refined sugar imports to fall by approximately half.

Specialty and organic sugar followed another pattern. These imports increased in late 2025 because USDA maintained the fiscal year 2026 specialty sugar quota at the World Trade Organization minimum. This moved most organic imports out of the low duty specialty quota and into the high tier category.

A New and Uneven Tariff Landscape

The tariff landscape changed again in February 2026. The IEEPA tariffs were vacated on February 20, and a temporary 10% Section 122 surcharge took effect on February 24. That surcharge expired on July 24, 2026.

A 25% Section 301 tariff now applies to certain Brazilian goods, including sugar. Additional forced labor tariffs ranging from 10% to 12.5% apply across 60 economies.

Brazil faces a 12.5% forced labor tariff in addition to the 25% Brazil specific tariff, producing a combined rate of 37.5%. Several countries that replaced Brazilian shipments, including El Salvador, Guatemala, Argentina, and Honduras, face rates of 10%.

These actions cover a broader group of suppliers and are expected to slow over quota imports. However, because the rates vary among countries, sugar may continue to shift toward suppliers facing lower barriers.

Exhibit 9: The U.S. and World Raw Sugar Spread and the Cost of Shipping Over the Tier-2 Duty, 2012 to 2026.

Note: The solid line represents the U.S. No. 16 price minus the world No. 11 price. The cost lines include the Tier-2 duty, estimated freight, and the new Section 301 tariff rates.

Source: NDSU using USDA ERS Sugar and Sweeteners Yearbook Tables.

The Outlook for Tier-2 Sugar Imports

The experience under the IEEPA tariffs shows both the reach and the limits of tariffs in the Tier-2 sugar market. A sufficiently high tariff can sharply reduce shipments from the country it covers. However, when other suppliers face lower rates, imports may shift rather than disappear.

Since 2021, the difference between U.S. and world sugar prices has generally remained above the cost of entry for many coastal importers. Even after accounting for the new Section 301 tariffs, the price difference remains sufficient to support profitable imports from several lower tariff suppliers.

For that reason, imports from any single country provide only a partial view of market conditions. Total over quota imports across all suppliers, the domestic stocks to use ratio, and the Mexican allocation under the Needs Formula provide a more complete picture.

If Tier-2 sugar continues to enter through countries facing lower tariffs, it may continue to place pressure on domestic prices, grower returns, acreage, and processor finances even if Brazilian shipments remain below previous levels.

Read the full July 2026 NDSU Agricultural Trade Monitor: Tier-2 Sugar Imports under IEEPA and Section 122 and Outlook with New Section 301 Tariffs

For inquiries, contact:

Shawn Arita – shawn.arita@ndsu.edu

Ming Wang – ming.wang@ndsu.edu

Sandro Steinbach – sandro.steinbach@ndsu.edu