The European Union suspends nitrogen-based fertilizer tariffs to counter severe supply chain shocks and asset inflation driven by the Strait of Hormuz conflict. For Mexico, this global supply crunch amplifies structural import vulnerabilities and input costs, potentially driving domestic food and logistical inflation. Mexican agricultural producers, chemical distributors, and trade regulators face immediate margin pressures, forcing a strategic reassessment of bilateral trade partnerships and fertilizer sourcing strategies.

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The Council of the EU decided to suspend customs tariffs on key nitrogen-based fertilizers and production inputs, such as urea and ammonia, for one year. The measure is aimed at insulating the bloc’s agricultural sector from inflationary risks triggered by the conflict in the Middle East and the closure of the Strait of Hormuz, while concurrently accelerating the EU’s transition away from Russian and Belarusian supply chains

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According to estimates from the European Commission, the temporary measure is projected to reduce import duty costs for EU agricultural producers and the fertilizer industry by approximately €60 million (US$69.6 million). The policy is intended to lower operational expenses within the agricultural sector, diversify international trading networks, and decrease the bloc’s reliance on Russia and Belarus.

Under the framework of the decision, the tariff suspension applies exclusively to products that are not already entering the EU market duty-free under Most Favoured Nation (MFN) status or other preferential trade agreements. To safeguard the economic interests of domestic EU fertilizer manufacturers, the regulation establishes an import quota that is calculated based on the total volume of MFN imports recorded in 2024, supplemented by an additional 20% of the import volumes received from Russia and Belarus during that same year. 

“The EU has decided that the suspension will not apply to products imported from Russia due to its unprovoked and unjustified war of aggression against Ukraine. Nor will it apply to products imported from Belarus, given its support for Russia, and its disregard for international law, fundamental freedoms, and human rights,” reads the European Council’s press release.

The legislative intervention follows a substantial upward trend in fertilizer asset pricing that began in 2021, which inflated agricultural production costs and impacted consumer food prices. 

Statistical data indicate that the EU imported 2Mt of ammonia and 5.9Mt of urea in 2024 to support domestic nitrogen fertilizer manufacturing, alongside 6.7Mt of finished nitrogen-based fertilizers and mixtures. While a significant volume of these imports already enters the EU duty-free via existing trade partnerships, remaining volumes supplied by countries subject to the common customs tariff face standard duty rates ranging between 5.5% and 6.5%. 
“Today’s decision gives European farmers better access to affordable, reliable fertilizer supplies,  good news for the agriculture sector and EU consumers alike. At the same time, we are accelerating away from Russian and Belarusian products and building more resilient supply chains and partnerships globally,” said Makis Keravnos, Minister of Finance of the Republic of Cyprus. 

The Middle East Conflict Impacts Commodity Prices
Global commodity prices have risen an average of 16% this year as the military conflict involving the United States, Israel, and Iran shows little prospect of concluding soon, driving Brent crude oil benchmarks above US$112/b and pushing fertilizer costs to their highest level since 2022. The World Bank warned that energy prices alone could rise 24% in 2026 due to shipping disruptions in and around the Strait of Hormuz, while hydrocarbon-derived fertilizer prices are projected to surge 31% this year, reducing farm incomes and threatening future crop yields, as reported by MBN.

According to updated data from the World Bank, the overall global fertilizer price index advanced more than 12% during 1Q26, reaching its highest level since October 2022. Driven by the transit collapse within the Middle East trade corridor, which handles nearly one-quarter of global seaborne urea exports, international urea prices climbed above US$850/t, marking an 80% surge since February 2026. Concurrently, diammonium phosphate benchmarks rose more than 10%, heavily exacerbated by international sulfur prices doubling since January 2026, alongside a tightening of domestic export curbs enacted by China.

The supply-side constraints are further amplified by physical infrastructure outages across primary manufacturing hubs. Regional production data indicate that Iran completely halted domestic ammonia operations amid the conflict, while Qatari manufacturing facilities suspended the production of urea, ammonia, and sulfur following extensive operational damage to key industrial assets. This tightening of international supply networks has subsequently reduced domestic input volumes and downstream output in major consumption markets like India, pushing global fertilizer affordability metrics for agricultural producers to their weakest levels since mid-2022.

The ongoing maritime blockade has triggered wider economic warnings, with the World Food Program estimating that rising fertilizer and food costs could push up to 45 million more people into acute food insecurity in 2026. Indermit Gill, Chief Economist, World Bank Group, stated that the war is hitting the global economy in cumulative waves, moving from higher energy prices to increased food costs and elevated inflation. While diplomatic efforts between the United States and Iran remain at an impasse regarding shipping restrictions and nuclear talks, the transit halt continues to disrupt global supply chains, including a potential jet fuel shortage in Europe.