Brazil Weighs Trade Retaliation Against US Over 50% Tariffs

Brazil is contemplating retaliatory trade measures against the United States following the implementation of a substantial 50 per cent tariff on various Brazilian imports. This decision comes after President Donald Trump imposed the levies, prompting a response from the Brazilian government. According to government sources, President Luiz Inacio Lula da Silva has approved an evaluation of potential countermeasures in light of the tariffs, which were enacted amid ongoing tensions surrounding the legal challenges faced by his political ally, former President Jair Bolsonaro.

August 28, 2024, marks a significant moment in this developing trade conflict. The Ministry of Trade and Industry has been given a 30-day period to assess whether the US tariffs breach the newly established Economic Reciprocity Law. This legislation, adopted in April, empowers the Brazilian government to implement countermeasures against countries that take unilateral actions detrimental to Brazil’s economic competitiveness.

If the Ministry determines that the US tariffs violate this law, a panel of experts will be tasked with proposing a range of possible responses. These could include reciprocal tariffs aimed at US exports, as well as other trade restrictions. A diplomatic source indicated that the Brazilian government plans to formally notify the United States of its intentions to explore these potential measures.

The Economic Reciprocity Law is designed as a last resort to protect Brazil’s trading interests, allowing for actions such as suspending trade concessions and intellectual property agreements should negotiations with the offending country fail. Current relations between Brazil and the United States have reached a critical juncture since the tariffs on Brazilian coffee and other goods were enforced on August 6, 2024.

Earlier on the same day, President Lula expressed frustration over the lack of communication from US officials. He stated, “We could not talk to anyone from the United States,” highlighting the diplomatic strain that has resulted from the tariffs. While Trump’s trade policies have primarily targeted nations with substantial trade surpluses with the US, Brazil’s situation is markedly different. The country has a significant trade deficit with the United States, with imports exceeding exports. In fact, the US recorded a trade surplus of US$28.6 billion with Brazil in 2024.

The tariffs imposed by Trump have particularly affected Brazil’s imports of steel-based manufactured goods, including industrial machinery, automotive engines, and components for the aerospace sector. The rationale provided by the Trump administration for these tariffs has been linked to the ongoing legal issues involving Bolsonaro, who is currently on trial for alleged coup plotting.

In response to this escalating trade dispute, Brazil has sought assistance from the World Trade Organization to facilitate dialogue and potentially resolve the conflict amicably. As both nations navigate these complex trade dynamics, the outcome remains uncertain, with significant implications for bilateral relations and the broader international trading landscape.