The Brazilian real slumped nearly 3% against the US dollar on the back of the announcement. — Bloomberg
BRASILIA: Donald Trump’s threat to impose 50% tariffs on Brazilian goods sent the country’s currency plunging as the US leader sharply escalated a dispute with Latin America’s largest nation and leftist leader Luiz Inacio Lula da Silva.
In a letter posted to his social media account, Trump cited Jair Bolsonaro – the right-wing former president and Lula rival who is facing a trial on charges that he attempted a coup following his 2022 election defeat.
Trump made a direct link to politics, saying he was making the change “due in part to Brazil’s insidious attacks on free elections, and the fundamental free speech rights of Americans.”
The charges against Bolsonaro, a leader who mimicked Trump’s political style during his presidency, stem from an investigation into post-election riots in Brazil’s capital that have drawn comparisons to the Jan 6, 2021 insurrection attempt in Washington.
Bolsonaro has repeatedly appealed for Trump’s help as his legal woes mount.
The Brazilian real slumped nearly 3% against the US dollar on the back of the announcement, while the iShares MSCI Brazil ETF – the largest US-listed exchange-traded fund tracking the nation’s equities – was down almost 2% in post-market trading.
Brazil had been set to face the minimum 10% levy under the so-called “reciprocal” tariffs Trump originally unveiled in April.
The letter, the latest of more than 20 posted by Trump in recent days, was the first substantial upward revision from previously announced rates.
While it borrows language about “reciprocity” from the others, Brazil is the first receiver that did not run a goods trade surplus with the United States – suggesting particular frustration on the part of Trump.
The United States is Brazil’s second-largest trading partner, trailing only China, and such a high tariff could cause significant damage to some of the South American nation’s industries.
“Steel products, transportation equipment – mainly aircraft and aircraft parts – and specialised machinery such as civil engineering equipment, besides non-metallic minerals account for a significant portion of Brazilian exports to the United States,” said Felipe Arslan, CEO at Morada Capital.
Planemaker Embraer ADRs tumbled as much as 9% in after hours trading on the news. Beyond the economic repercussions, analysts expressed concerns about the political ramifications of the tariffs.
The United States and Brazil are historic partners that have long enjoyed strong relations even when led by presidents with ideological differences – a dynamic Trump’s announcement threatens to put at risk.
“It’s not just a matter of bilateral trade,” said Solange Srour, head of Brazil macroeconomics at UBS Global Wealth Management.
“These tariffs are showing that our relations between countries as a whole, institutionally, are degraded and damaged. Fifty per cent is a tariff that, in many cases, can make exports unfeasible.”
Shortly after the announcement, Lula called top cabinet members – including Finance Minister Fernando Haddad, Foreign Minister Mauro Vieira and vice-president Geraldo Alckmin, who also heads Brazil’s ministry of industry and trade – into a meeting at the presidential palace, according to sources.
Trump’s announcement came just days after he had threatened to impose additional tariffs on members of the BRICS bloc of emerging market nations over its supposed “anti-American policies.”
BRICS leaders hosted by Lula in Rio de Janeiro this week had criticised trade-distorting tariff policies and military strikes on Iran in their official declaration, moves that put them at odds with Trump even as they shied away from direct challenges to the United States.
After making little mention of Brazil over the initial months of his term, Trump also rushed to the defence of Bolsonaro on Monday, accusing the South American nation of politically persecuting the former president.
In the letter, Trump reiterated his call on authorities to drop charges against Bolsonaro over the alleged coup attempt.
“This Trial should not be taking place. It is a Witch Hunt that should end IMMEDIATELY!” Trump wrote.
Lula blasted Trump at the end of the BRICS summit, telling him to mind his own business and calling him “irresponsible for threatening tariffs on social media.”
He also urged world leaders to find ways to reduce international trade’s reliance on the dollar.
A spokesperson for Brazil’s Supreme Court, which is overseeing Bolsonaro’s trial, declined to comment.
Earlier Wednesday, Brazil’s foreign affairs ministry called the top US representative in the country to a meeting to explain statements about Bolsonaro.
Brazil is unusual among Trump’s most recent tariff targets because it runs a deficit in trade with the United States, while almost all the others post large surpluses.
In 2024 Brazil imported some US$44bil of American products, while US imports from Brazil were around US$42bil, according to the Census Bureau. — Bloomberg
