WASHINGTON—The Trump administration has decided to approve expanded use of ethanol fuel, a move that will help corn farmers hurt by the trade conflict with China—and that might pay political dividends for President Trump in farm-belt states such as Iowa.

Under the decision to be made public Friday, the Environmental Protection Agency will allow gasoline with a 15% mix of ethanol to be sold year-round, instead of just eight months a year, effective as soon as it is published in the Federal Register, which officials expect to...