Where does it say they sell 40% less volume? Under this scheme, the amount of US ethanol that can get in tariff-free is limited to two-thirds of the total Asian ethanol production. Does the US export that much anyway?
Let's say you're an American company and you have a contract to supply 1 million litres to a Chinese customer. If you want to avoid tariffs you now have to use only 600,000 litres of American ethanol where you would have used 1 million before.
It may not end up that much a drop in the end, but it clearly encourages to use less American ethanol.