The decision could be unwelcome news for larger oil refiners that have argued that additional blending obligations would raise their costs. But it could help the biofuel industry by boosting demand for blending credits.

WHY IT MATTERS: U.S. biofuel policy can effect demand for Canadian canola.

Under the Renewable Fuel Standard (RFS), oil refineries have to blend billions of gallons of ethanol and other biofuels into their fuel or buy credits, called RINs, from those that do. But small refineries can have those obligations waived if they demonstrate economic hardship.

The question of whether to reallocate those exempted blending obligations to larger refiners is a point of contention between the agriculture and fuel industries.

Biofuel groups have pushed the administration to fully reallocate the exempted gallons, saying it is crucial to support biofuel producers and the farmers growing their feedstocks. Refiners, meanwhile, have warned that reallocation unfairly forces larger plants to cover for smaller rivals, raising their compliance costs and potentially increasing pump prices.

The issue has taken on added significance after the Trump administration processed a large backlog of waiver requests totaling more than 2 billion gallons for the years 2023 through 2025, representing a sizable share of overall renewable fuel blending requirements.

Potential shift toward higher biofuel blending?

EPA officials in recent weeks have signaled they settled on reallocating at least 50 per cent of the waived volumes for those three years, and that the level could go higher, according to the sources, who asked not to be named discussing the matter.

That reflects a shift in preference toward increased biofuels blending, after the Environmental Protection Agency last year initially sought public feedback on a range of options from zero to 100 per cent.

The EPA did not comment on the Reuters reporting, but said that the agency was considering public comments and aimed to finalize the rule by the end of March.

The White House did not respond to requests for comment about the reallocation plan.

The EPA also sent its proposed 2026 and 2027 biofuel blending quotas to the White House on Wednesday, with a final rule expected before the end of March, an EPA administrator told attendees at an ethanol conference in Florida on Wednesday.

The sources cautioned that no final decision has been made and the approach could change before it is formally released.

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The delay now under discussion could please domestic oil refiners that have invested in the bio-based diesel sector but would risk frustrating U.S. farmers and biofuel producers.

WHY IT MATTERS: The Trump administration’s proposal to reduce incentives for imported biofuels raised concerns it would reduce demand for Canadian canola.

The proposal for the Environmental Protection Agency to slash the value of renewable fuel credits given by the U.S. government for imported biofuels was initially pitched this year as part of Trump’s “America First” energy agenda, aimed at boosting domestic production and reducing reliance on foreign supply, and was meant to take effect Jan. 1.

The Environmental Protection Agency is now weighing a plan to delay implementation of that proposal until 2027 or 2028, the sources told Reuters, speaking on condition of anonymity.

The EPA said it is reviewing public comments ahead of issuing final rules in the coming months. The agency declined to comment on whether it is considering a delay. The White House did not respond to requests for comment.

Affordability concerns

Big Oil, led by the influential American Petroleum Institute industry group, had argued that limiting credits for foreign supply could constrain availability and push fuel prices higher – an outcome the White House is eager to avoid as affordability remains a central political concern heading into next year’s congressional elections.

Under the proposed cuts in credits for imports, the EPA would allocate only half as many tradable renewable fuel credits to imported biofuels and biofuel feedstocks as to domestic ones. The shift has significant implications for bio-based diesel, which relies on imports to meet federal mandates.

The decision on a possible delay is one of several high-profile regulatory moves by the administration that the fuel industry is closely watching.

Others include finalizing 2026 biofuel blending mandates, determining whether to allow year-round sales of gasoline blended with 15 per cent ethanol, or E15, and deciding how or whether to require larger refiners to compensate for exempted gallons under the small refinery waiver program.

The protracted U.S. government shutdown and efforts to resolve a logjam of small refiner requests for exemptions from U.S. biofuel laws have also contributed to delays in resolving regulatory moves related to biofuels, the sources said.

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The delay now under discussion could please domestic oil refiners that have invested in the bio-based diesel sector but would risk frustrating U.S. farmers and biofuel producers.

WHY IT MATTERS: The Trump administration’s proposal to reduce incentives for imported biofuels raised concerns it would reduce demand for Canadian canola.

The proposal for the Environmental Protection Agency to slash the value of renewable fuel credits given by the U.S. government for imported biofuels was initially pitched this year as part of Trump’s “America First” energy agenda, aimed at boosting domestic production and reducing reliance on foreign supply, and was meant to take effect Jan. 1.

The Environmental Protection Agency is now weighing a plan to delay implementation of that proposal until 2027 or 2028, the sources told Reuters, speaking on condition of anonymity.

The EPA said it is reviewing public comments ahead of issuing final rules in the coming months. The agency declined to comment on whether it is considering a delay. The White House did not respond to requests for comment.

Affordability concerns

Big Oil, led by the influential American Petroleum Institute industry group, had argued that limiting credits for foreign supply could constrain availability and push fuel prices higher — an outcome the White House is eager to avoid as affordability remains a central political concern heading into next year’s congressional elections.

Under the proposed cuts in credits for imports, the EPA would allocate only half as many tradable renewable fuel credits to imported biofuels and biofuel feedstocks as to domestic ones. The shift has significant implications for bio-based diesel, which relies on imports to meet federal mandates.

The decision on a possible delay is one of several high-profile regulatory moves by the administration that the fuel industry is closely watching.

Others include finalizing 2026 biofuel blending mandates, determining whether to allow year-round sales of gasoline blended with 15 per cent ethanol, or E15, and deciding how or whether to require larger refiners to compensate for exempted gallons under the small refinery waiver program.

The protracted U.S. government shutdown and efforts to resolve a logjam of small refiner requests for exemptions from U.S. biofuel laws have also contributed to delays in resolving regulatory moves related to biofuels, the sources said.

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The deal, announced by Trump and British Prime Minister Keir Starmer on the sidelines of the G7 Summit in Canada, reaffirmed quotas and tariff rates on British automobiles and eliminated tariffs on the U.K. aerospace sector, but the issue of steel and aluminum remains unresolved.

Other critical industries, such as pharmaceuticals, were not mentioned.

Trump said the relationship with Britain was “fantastic,” as he waved, and then briefly dropped, a document that he said he had just signed.

“We signed it and it’s done,” he said, incorrectly calling it a trade agreement with the European Union, before making clear the deal was with Britain.

Starmer called it “a very good day for both of our countries, a real sign of strength”

What’s included

The U.S. intends to impose a quota on steel and aluminum imports from the United Kingdom that would be exempt from 25 per cent tariffs, but it is conditioned upon Britain’s demonstrating security on steel supply chains and production facilities, according to an executive order released by the White House.

The quota level will be set by Commerce Secretary Howard Lutnick, the White House said.

Britain had avoided tariffs of up to 50 per cent on steel and aluminum that the U.S. imposed on other countries earlier this month, but it could have faced elevated tariffs starting July 9 unless a deal to implement the tariff reduction was reached.

The two leaders reaffirmed a plan to give British carmakers an annual quota of 100,000 cars that can be sent to the United States at a 10 per cent tariff rate, less than the 25 per cent rates other countries face.

The plan will go in effect seven days after it is published in the Federal Register, the White House said.

The agreement also eliminates tariffs on the UK aerospace industry, including parts and planes, according to the executive order.

Delayed implementation

Britain was the first country to agree on a deal for lower tariffs from Trump, with the U.S. reducing tariffs on imports of UK cars, aluminum and steel, and Britain agreeing to lower tariffs on U.S. beef and ethanol.

But implementation of the deal has been delayed while details were being hammered out and some issues remain outstanding.

Britain called the deal a huge win for its aerospace and auto sectors, noting the UK was the only country to have secured such a deal with Washington.

“Bringing trade deals into force can take several months, yet we are delivering on the first set of agreements in a matter of weeks. And we won’t stop there,” UK Trade Secretary Jonathan Reynolds said in a statement.

Reynolds said the two sides agreed to reciprocal access to 13,000 metric tons of beef, while making clear that U.S. imports would need to meet tough UK food safety standards.

He said both countries remain focused on securing “significantly preferential outcomes” for the UK pharmaceutical sector, and work would continue to protect industry from any further tariffs imposed as part of Section 232 investigations underway by the U.S. Commerce Department.

Asked if the deal protects the United Kingdom from future tariff threats, Trump responded: “The UK is very well protected. You know why? Because I like them. That’s their ultimate protection.”

— Reporting by Jarrett Renshaw, Suzanne Plunkett and Andrea Shalal

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The coalition also recommended total federal biofuel blending mandates for 2026 at 25 billion gallons, the sources said. The coalition, led by the American Petroleum Institute, a top U.S. oil trade group, presented the figures to the EPA in a meeting last week.

Why it matters: The trajectory of the U.S. biofuel market has implication for Canadian oilseed producers

While the recommendations were for one year of mandates, the EPA is expected to release a proposal that covers both 2026 and 2027, Reuters previously reported.

API declined to comment on specific numbers, while the EPA did not respond to a request for comment.

The coalition’s suggestion of 5.25 billion gallons for biomass-based diesel mandates was slightly lower than the range of 5.5 billion to 5.75 billion gallons considered ahead of the meeting and previously reported by Reuters.

Big Oil and the Farm Belt’s biofuel makers are traditional competitors in the multibillion-dollar U.S. gasoline market, but have come together to form a consensus at the request of the White House in recent months in hopes of avoiding the type of clashes that defined the first Trump administration.

The new 5.25 billion-gallon figure from the API-led coalition is in line with a number recommended to the EPA by Clean Fuels Alliance America – a U.S. biodiesel trade group – along with farm and feedstock groups.

In a mid-March letter to EPA Administrator Lee Zeldin, that coalition said EPA’s previous mandates failed to support the growth of the advanced biofuel industry and undercut the market.

The EPA set biomass-based diesel mandates for the 2025 compliance year at 3.35 billion gallons.

Under the U.S. Renewable Fuel Standard, oil refiners must blend billions of gallons of biofuels into the nation’s fuel mix, or buy tradable credits from those that do.

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The EPA meeting signals that the agency may be closer to releasing fresh biofuel blending quotas for the Renewable Fuel Standard (RFS) for at least the next two years, a first test of President Donald Trump’s promised support of the biofuel industry.

Why it matters: The rise and fall of the American biofuel market can affect Canadian farmers’ crop marketing prospects

Big Oil and the Farm Belt’s biofuels makers are traditional competitors for share in the multibillion-dollar U.S. gasoline market, but they have come together to form a consensus at the request of the White House in recent months in hopes of avoiding the type of clashes that defined the first Trump administration.

The coalition is likely to push for biomass diesel mandates in the range of 5.5 billion to 5.75 billion, according to a coalition document viewed by Reuters. That is up from its current level of 3.35 billion gallons, which the biofuel industry says is far below production capacity.

The coalition has settled on a corn-based ethanol blending mandate at 15 billion gallons, despite a push by some who wanted to see 15.25 billion gallons, according to two sources familiar with the discussions.

The EPA did not respond to requests for comment.

The coalition, led by the American Petroleum Institute (API), is showing some signs of splintering, however, ahead of Tuesday’s meeting.

A group of truck stop operators and fuel retailers involved in the effort is boycotting the meeting after a dispute over whether they could voice concerns about raising biomass diesel quotas without restoring a blenders tax credit that expired in December.

The splinter group says the blenders tax credit helped keep prices down for consumers, and its replacement – a producer tax credit known as 45Z- is incomplete and has been proven ineffective.

“This will not only hurt Americans’ financial standing, it will also create exceedingly difficult political challenges for the Agency and the White House,” the splinter group said in a letter to EPA administrator Lee Zeldin on Tuesday.

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Big Oil and the Farm Belt’s biofuels makers are traditional competitors for share in the multibillion-dollar U.S. gasoline market. They have repeatedly fought over details of the U.S. Renewable Fuel Standard, a program that requires billions of gallons of corn-based ethanol and other biofuels to be blended into the country’s fuel supply.

Why it matters: The rise and fall of the North American biofuel industry has major implication for Canadian oilseed farmers, who are already besieged by tariffs and trade tensions

The White House directive has already yielded at least two bilateral meetings, including one hosted last week by the American Petroleum Institute, said the sources, who include Will Hupman, API’s vice president of downstream policy, and three others who asked not to be named.

At that meeting, representatives discussed issues like the size of future mandated biofuel blending volumes, exemptions for small refiners, and biofuel tax policy, Hupman and the other sources said.

Any agreement reached between the two powerful industries could be adopted by the Trump administration.

“It makes it easier for (the Trump administration) to arrive at whatever number they arrive at if they are hearing from groups that have historically been at the opposite sides of this,” said Hupman.

Blending volumes and waivers

Among the most important issues discussed, the U.S. Environmental Protection Agency is preparing new blending mandates under the RFS that will govern volumes for the next two to three years, along with the program’s multibillion-dollar compliance credit market.

Three of the sources said the group has already agreed in principle to ask that the EPA significantly raise the mandate for renewable diesel and biodiesel from its current level of 3.35 billion gallons, which the biofuel industry says is far below production capacity.

The range discussed was between 4.75 billion and 5.5 billion gallons, with some wanting higher volumes in 2026 and others pushing for a more gradual rise, the three sources said.

Blending mandates for ethanol, meanwhile, have capped out at 15 billion gallons, and the parties saw little growth prospect due to plateauing demand for gasoline, the sources said.

The groups were also split over small refinery exemptions to the RFS, one of the most controversial and divisive issues, the sources said.

In Trump’s first administration, the EPA approved a record number of such exemptions, letting small refiners sidestep their blending obligations, and triggering political backlash from his Republican allies in the Farm Belt who said it punished farmers.

Legal challenges

Former President Joe Biden sought to do away with the exemptions, triggering legal challenges that reached the U.S. Supreme Court earlier this month. Several exemption requests are pending before the EPA.

The groups were split over whether the administration should force other refiners to make up for any exempted blending volumes, a position opposed by the U.S. refining industry, the sources said.

Another crucial issue discussed at last week’s meeting was the fate of a new tax credit created for biomass-based diesel under the Biden administration but was not finalized. The program, known as 45Z, replaced a flat $1 per gallon blenders credit and instead rewards producers based on the carbon intensity of their fuels.

Trump and Republicans have not said whether they would move forward with 45Z.

Some at the meeting, including the National Association of Truck Stop Operators, or NATSO, backed a return to the blenders credit while others wanted to support the new 45Z tax credit, according to the sources.

“There was no consensus other than a consensus to keep talking,” said one attendee.

The discussions marked a new phase of cooperation between the Farm Belt and Big Oil, according to Hupman.

He said the divide between the industries has softened in recent years as major refiners like Marathon Petroleum and Valero have invested in biofuels production.

“Our companies have evolved as the fuels landscape has evolved,” said Hupman. “We have a realization that the RFS is here to stay and we want to make sure it functions as efficiently as intended.”

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Mexico and Canada, the top two U.S. trading partners, immediately vowed retaliatory tariffs, while China said it would challenge Trump’s move at the World Trade Organization and take other “countermeasures.”

In three executive orders, Trump imposed 25 per cent tariffs on Mexican and most Canadian imports and 10 per cent on goods from China, starting on Tuesday.

He vowed to keep the duties in place until what he described as a national emergency over fentanyl, a deadly opioid, and illegal immigration to the U.S. ends. The White House provided no other parameters for determining what might satisfy Trump’s demands.

Responding to concerns raised by oil refiners and Midwestern states, Trump imposed only a 10% duty on energy products from Canada, with Mexican energy imports facing the full 25 per cent tariff.

Prime Minister Justin Trudeau said Canada would respond with 25 per cent tariffs against C$155 billion of U.S. goods, including beer, wine, lumber and appliances, beginning with C$30 billion taking effect Tuesday and C$125 billion 21 days later.

Trudeau warned U.S. citizens that Trump’s tariffs would raise their grocery and gasoline costs, potentially shutting down auto assembly plants and limiting supplies of goods such as nickel, potash, uranium, steel and aluminum. He urged his own citizens to forego travel to the U.S. and to boycott U.S. products.

Mexican President Claudia Sheinbaum, in a post on X, said she was instructing her economy minister to implement retaliatory tariffs but gave no details.

Canada and Mexico said they were working together to face Trump’s tariffs.

China’s Commerce Ministry did not specify its planned countermeasures. Its statement left open the door for talks between Washington and Beijing.

“China hopes that the US will view and handle its own fentanyl and other issues in an objective and rational manner,” it said, adding that Beijing wanted to “engage in frank dialogue, strengthen cooperation and manage differences.”

A White House fact sheet said the tariffs would stay in place “until the crisis alleviated,” but gave no details on what the three countries would need to do to win a reprieve.

At nearly $100 billion in 2023, imports of crude oil accounted for roughly a quarter of all U.S. imports from Canada, according to U.S. Census Bureau data.

Automakers would be particularly hard hit, with new steep tariffs on vehicles built in Canada and Mexico burdening a vast regional supply chain where parts can cross borders several times before final assembly.

The tariff announcement makes good Trump’s repeated threat during the 2024 presidential campaign and since taking office, defying warnings from top economists that a new trade war with the top U.S. trade partners would erode U.S. and global growth, while raising prices for consumers and companies.

Republicans welcomed the news, while industry groups and Democrats issued stark warnings about the impact on prices.

National Foreign Trade Council President Jake Colvin said Trump’s move threatened to raise the costs of “everything from avocados to automobiles” and urged the U.S., Canada and Mexico to find a quick solution to avoid escalation.

The three countries should work together to “gain a competitive advantage and facilitate American companies’ ability to export to global markets,” Colvin said in a statement.

Provincial officials and business executives in Canada also reacted with outrage, calling for forceful tariffs on imports from the U.S.

Roughly 90 minutes after Trump’s announcement, the American national anthem was booed in the nation’s capital Ottawa ahead of the opening face-off at the Ottawa Senators and Minnesota Wild National Hockey League game. The Senators won 6-0.

U.S. tariff collections are set to begin at 12:01 a.m. EST on Tuesday, according to Trump’s written order. But imports that were loaded onto a vessel or onto their final mode of transit before entering the U.S. before 12:01 a.m. Saturday would be exempt from the duties.

Trump declared the national emergency under the International Emergency Economic Powers Act and the National Emergencies Act to back the tariffs, which allow the president sweeping powers to impose sanctions to address crises.

Trade lawyers said Trump was once again testing the limits of U.S. legislation and the tariffs could face legal challenges, while Democratic lawmakers Suzan DelBene and Don Beyer decried what they called “a blatant abuse of executive power.”

White House officials said there would be no exclusions from the tariffs and if Canada, Mexico or China retaliated against American exports, Trump would likely increase the U.S. duties.

Nova Scotia’s Premier Tim Houston said he directed that all alcohol imported from the U.S. be removed from the province’s store shelves.

The White House officials said that Canada specifically would no longer be allowed the “de minimis” U.S. duty exemption for shipments under $800. The officials said Canada, along with Mexico, has become a conduit for shipments of fentanyl and its precursor chemicals into the U.S. via small packages that are not often inspected by customs agents.

Long-promised tariffs

Trump spoke extensively about the tariffs on Friday, acknowledging they could lead to disruptions and hardships for Americans. He said additional tariffs were planned against steel, aluminum, semiconductor chips and pharmaceuticals.

The Republican president was not scheduled to speak to reporters about the tariffs after the announcement.

Trump’s tariff move was led by Deputy Chief of Staff Stephen Miller, a forceful hawk on illegal immigration, and Trump’s nominee to head the Commerce Department, Howard Lutnick, who flew to Florida with Trump on Friday, a White House official said.

Less than two weeks into his second term, Trump is upending the norms of how the United States is governed and interacts with its neighbors and wider world.

A model gauging the economic impact of Trump’s tariff plan from EY Chief Economist Greg Daco suggests it would reduce U.S. growth by 1.5 percentage points this year, throw Canada and Mexico into recession and usher in “stagflation” at home.

“Steep tariff increases against U.S. trading partners could create a stagflationary shock – a negative economic hit combined with an inflationary impulse – while also triggering financial market volatility,” Daco wrote on Saturday.

That volatility was evident on Friday, when the Mexican peso and Canadian dollar both slumped after Trump vowed to fulfill his threats. U.S. stock prices also fell and Treasury bond yields rose.

—Reporting by Jarrett Renshaw in Palm Beach and David Lawder and Andrea Shalal in Washington

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The inclusion would mark a hard-fought victory for the ethanol industry, which has wanted year-round E15 (fuel comprising 15 per cent ethanol) sales as a way to boost demand for its products.

Reuters reported earlier on Tuesday that the plan was expected to make it into the bill.

The plan would also provide credits to some refiners that prove compliance with the U.S. Renewable Fuel Standard (RFS), which mandates that refiners blend billions of gallons of biofuels into the nation’s fuel mix or buy credits from those that do, the sources said.

Those credits would be given to small refiners who had petitioned the U.S. Environmental Protection Agency, which administers the RFS, for an exemption from the mandates during compliance years 2016-2018 but either had been denied or had an outstanding petition as of Dec. 1, 2022, one of the sources said.

The language in the provision follows a bill sponsored by U.S. Senator Deb Fischer from Nebraska, the third biggest corn-producing state.

“My bill puts an end to years of patchwork regulations and uncertainty – year-round, nationwide E15 will now be a reality,” Fischer said in a statement after the funding bill text was released.

The biofuels industry welcomed the provision.

“We are very pleased to see that the long-awaited fix allowing year-round E15 is included in this package,” said Geoff Cooper, president of the Renewable Fuels Association. “We remain hopeful that the continuing resolution will move swiftly through Congress and to the President’s desk for signature.”

The plan also includes language that the EPA and the Commodity Futures Trading Commission would review all applicable fuel blending credits, known as RINs, and submit to Congress a report to reduce manipulation of the renewable fuel market.

Currently, sales of E15 are effectively blocked from June to September. Adding ethanol to gasoline is known to increase smog pollution in hot weather, but research has shown little difference between E15 and the more-widely available E10 blends.

The provision would likely nullify a controversial decision by the U.S. government in February to approve a request from Midwestern governors to allow year-round E15 sales only in their states, starting in 2025.

Some oil refiners had argued that allowing E15 in select states as opposed to nationwide could prompt localized fuel price spikes and supply issues.

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Dozens of groups including the American Farm Bureau Federation, Renewable Fuels Association and American Chemistry Council said “the time has come for the U.S. government to intervene and ensure port operations do not stop” in order to prevent damage to U.S. agriculture and the economy.

Republican Senator Ted Cruz raised concerns about the impact of a work stoppage, saying the U.S. “teeters on the brink of the first union strike among East and Gulf Coast ports since 1977.” He cited a JPMorgan analysis that projected a port strike could cost the U.S. economy $5 billion daily.

Negotiations between the International Longshoremen’s Association union and the United States Maritime Alliance (USMX) employer group appear to be deadlocked over pay as the Sept. 30 contract expiration approaches.

The White House did not immediately comment on the letter.

“We are monitoring and assessing potential ways to address impacts to U.S. supply chains related to operations at our ports, if necessary,” White House spokesperson Robyn Patterson said Tuesday, adding officials encourage continued negotiations “toward an agreement that benefits all sides and prevents any disruption.”

President Joe Biden’s administration has said the president does not intend to invoke a federal law known as the Taft-Hartley Act to prevent a strike.

A threatened strike by 45,000 ILA-represented workers at three dozen affected ports, including New York and New Jersey, Houston and Savannah, Georgia, would send delays and costs cascading through U.S. supply chains.

Approximately 40 per cent of U.S. containerized agricultural exports move through East and Gulf Coast ports, the agriculture groups said.

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