Chinese buyers of U.S. ethanol will have to cut their imports because of new higher tariffs but they will have to return to the overseas market to meet the government's targets for using the fuel, industry participants and analysts said on Monday.

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China said late on Sunday it will slap an extra 15% tariff on ethanol imports from the United States, as part of its response to U.S. duties on aluminum and steel imports. The previous duty was 30%.

The tariffs, effective Monday, will neutralise the cost savings from importing cheaper U.S. ethanol versus domestic supply, said three sources that participate in the market. Ethanol is an alcohol that is typically produced from corn or sugar and often mixed with gasoline to reduce air pollution from vehicle emissions.

"The price difference is gone. We will suspend imports for now," said a manager at a private oil refinery, adding that he was considering turning to domestic suppliers for ethanol to blend into gasoline.

First Published:Apr 2, 2018 12:24 PM IST