Trump expands access to tax-exempt red diesel

• President Donald Trump signed an executive order temporarily expanding access to tax-exempt red-dyed diesel for highway use through the end of 2026.
• The move comes as US diesel prices have surged, putting pressure on consumers, truckers and farmers ahead of the November midterm elections.

US President Donald Trump has signed an executive order temporarily allowing the use of tax-exempt red-dyed diesel on US highways, widening access to a fuel traditionally reserved for off-road uses such as agriculture, construction and heating.

Trump signed the order Monday during a campaign rally in Grand Island, Nebraska, saying it would waive the off-road requirement and allow Americans to purchase red-dyed diesel for highway use.

The White House said the measure is intended to lower diesel costs for farmers, truckers and other workers as restricted global supplies have pushed prices higher.

Under the executive order, the Treasury Department is directed to determine whether federal tax obligations on dyed diesel used on highways can be deferred under existing law.

If authorized, the taxes incurred between October 5 and December 31 will be deferred without penalties or interest. The order also directs the Treasury to explore options, including legislation, to eliminate the obligation to pay the deferred taxes.

The order also directs the Internal Revenue Service not to impose certain penalties related to the highway use of dyed diesel during the relief period.

The White House said the policy could save truckers more than $100 per refill, although the actual savings will depend on fuel prices, tax treatment and implementation by federal and state authorities.

Red-dyed diesel is essentially the same type of diesel fuel used in highway vehicles, but it is dyed red to distinguish it from taxable on-road diesel.

It is generally intended for off-road equipment, including farm machinery and construction equipment, and is exempt from federal highway fuel taxes when used for those purposes.

The dye allows authorities to identify fuel being used for tax-exempt purposes and enforce penalties when it is used improperly on public roads.

Trump's order temporarily changes how the federal government enforces those restrictions, rather than permanently eliminating the underlying tax law.

The move comes after US diesel prices climbed sharply. Reuters reported that prices reached about $6.50 per gallon last month, putting additional pressure on transportation and agricultural industries.

The White House attributed the increase to restricted global diesel supplies, including disruptions linked to the Russia-Ukraine war and limited refining capacity.

The policy also comes less than a month before the November 3 midterm elections, when Republicans are seeking to retain control of Congress. Rising fuel and food costs have become a major economic issue for voters.

Trump has argued that reducing diesel costs could help lower transportation expenses and, in turn, the price of goods.

However, Patrick De Haan of GasBuddy has argued that the central problem is supply rather than taxes, meaning the impact of the measure on overall diesel prices remains uncertain.