Brazilian coffee, meat, and fruit are now 50% more expensive in the U.S. Donald Trump’s decision, in effect since August 6, has set off alarms: it threatens Brazil’s trade ties with Washington, fuels inflation risks, and forces Lula’s government to act.
Since Donald Trump took office as President of the United States, the American government has adopted significantly aggressive measures both domestically and internationally, such as the ban on the irregular entry of immigrants into the country and the taxation of products exported by other countries to the United States. Brazil was inside in one of Trump’s protectionist measures. Despite the recent history of the former Bolsonaro government, when there was still a strong bond between both countries, Brazil is one of the main targets of the taxation.
At the end of July, Trump signed the decree imposing tariffs on various allied market countries, such as Canada, Italy, and Mexico, which came into effect on August 6. For Brazil, the situation worsened with the 50% tax on its products exported to the United States, some of which include coffee, meat, and fruits.
Despite the great concern coming from the South American country, Trump, along with the decree, announced more than 694 products — such as minerals, energy products, basic metals, and fertilizers — that will not be taxed and will remain tax-free, which reassured the Luiz Inácio Lula da Silva government. For the specialist in trade law and international law, Tayla:”It is necessary to carefully analyze the sectors affected by the tariffs to see how they will really react to the tariffs, but, in practical terms, I don’t see negative repercussions for Brazil.” First, there’s more than 694 products exempt from taxes, which could lead to a decrease in the domestic market due to a greater supply. And it is also necessary to closely monitor the negotiations with other partners, especially the BRICS and the European Union.
The White House, in a statement, declared: “Recent practices and actions of the Brazilian government constitute an unusual and extraordinary threat to the national security, foreign policy, and economy of the United States.” In the statement, the White House refers to recent events, such as the partial trials of the January 8 defendants and the trial of former President Jair Bolsonaro, who allegedly led an attempted coup, an accusation he denies. Currently, the process has led Bolsonaro to house arrest.
Trump emphasizes that negotiating with Brazil is proving to be very difficult.
Brazil’s measures on tariffs
The new tariffs caused a drop of billions of dollars in Brazilian exports. With no possibility of negotiation with Trump, the country was forced to take its first measures.. On Wednesday, the 13th, Lula’s government announced measures to reduce the impact of the tariffs on Brazil, which came into effect this August. According to the lawyer Tayla: “A bilateral and diplomatic agreement can reduce the impact of the tariff hikes.” We have seen several countries imposing higher tariffs and others negotiating for better tariffs to protect their exporters…”.
Among the points of Lula’s plan are subsidized credit lines, advance tax collection, and government purchases of food from impacted sectors. “We are not announcing reciprocity; see how we are negotiators.” “We don’t want, at first, to do anything that justifies worsening our relationship,” said Lula.
The government announced changes to the Export Guaranty Fund (FGE), through which the released resources of 30 billion will be used for subsidized loans, prioritizing companies most affected by the new measures of the American government. Furthermore, the package of measures stipulates that companies will be able to access credit through the guaranty fund. About 9.5 billion are earmarked for the possibility of companies receiving part of their taxes back, with 6% for micro and small businesses, and 3.1% for medium and large ones.
The government also authorized states, unions, and municipalities to purchase perishable products that would otherwise have been exported to the United States. The new law prioritizes distribution to the states most affected by the tariffs, such as Ceará, without establishing a purchase target. .
The halt in exportshas impacted many sectors in Brazil To avoid layoffs, the government will create the National Employment Monitoring Chamber, which will monitor and oversee labor agreements in affected companies. Thus, it seeks to meet the needs of companies and improve the situation.
How does the Brazilian’s wallet fare?
The United States is one of Brazil’s main economic partners, so the new tariffs in the foreign market impact the daily lives of Brazilians. With half of the products taxed, companies pass the damage on to the domestic market, causing an increase in product prices. In this way, with fewer dollars entering the country, the cost of exporting increases along with inflation, and thus, the purchasing power of the population is reduced.
Trump’s tariffs brought instability to trade relations, potentially reducing investments and impacting the stock market. According to lawyer Tayla: “It is an analysis to be done sector by sector… For food, it depends a lot on which area we are talking about, such as coffee, where the idea is that the product that would go to the United States stays in the national market, in addition to other partners.” Since there will be a greater supply in the coffee market, the price may fall, just like that of fruits…”. Taxes not only directly affect specific sectors, such as agriculture. With the increase in demands in the domestic market causing an adjustment in the price of products. Thus, it is necessary to analyze both the measures in the internal impact and in the export sector for the economy.
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The article above was edited by Mariana De Oliver.
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