Brazilian officials are confident about the 50% tariffs Trump imposed on the country's exports, while experts worry about beef and coffee in the US increasing.
President Donald Trump released a letter to Brazilian President Luiz Inacio Lula da Silva on July 9, announcing a 50% tariff on Brazilian goods imported into the US, much higher than the 10% rate he announced on April 2.
Unlike other countries that received Trump's letter, the US had a $6.8 billion trade surplus with Brazil last year. The South American economy has faced high tariffs largely due to political issues.
In the letter posted on Truth Social, Mr. Trump accused President Lula of working against former right-wing president Jair Bolsonaro, who is considered close to Mr. Trump and is facing trial for allegedly plotting a coup against Mr. Lula.
Immediately after the news of the US tariffs, shares of several major Brazilian companies plummeted on July 10, such as aircraft manufacturer Embraer, banks Itau Unibanco, and Banco Santander. The Brazilian real was also under pressure, falling 0.51% against the USD on July 11 and losing 2.5% over the past week.
However, Brazilian officials are generally confident. President Lula has vowed to seek new customers, saying the country "is not like the kind that cannot survive without the United States". Brazil is Latin America's largest economy. Although the United States is its second-largest export market, it accounts for only 12 percent of Brazil's exports, compared to its largest partner, China, which accounts for about 28 percent.
Economic Policy Chief Guilherme Mello said that even if the tariffs had "some" impact on growth, they would not be as severe as they had been in the past, as Brazil has diversified its trading partners over the past two decades.
On the other hand, some US experts and businesses worry about the impact of the 50 percent tariff, as Brazil is a major supplier of agricultural products such as coffee, beef, orange juice, sugar, and ethanol. According to four Reuters sources, the 50 percent tariff would virtually halt the flow of coffee from Brazil to the United States.
Similarly, analysts warn that beef prices in the United States are likely to rise because of the 50 percent tariff on Brazilian goods. US beef prices have hit a record this year, and production is expected to fall 2% to 26.4 million pounds, as the country’s herd is at its smallest in more than 70 years, as a prolonged drought depletes pastures.
US meat processors are already short on beef supplies, having halted imports of cattle from Mexico due to the spread of New World maggots. To cope, they have ramped up imports from other sources, including 175,000 tonnes of Brazilian beef in the first five months of the year, double the same period in 2024 and accounting for 21% of total imports.
If the 50% tariff takes effect on August 1, the total import duty on Brazilian beef will rise to about 76%. Bob Chudy, a consultant to US meat importers, said that without adjustments, imports of Brazilian beef will stop completely. “There is not a single kilo of meat that can be imported and make a profit at that tariff,” he said. Bob said the importer community is “at a loss for what to do.”
White House spokeswoman Anna Kelly said Trump is demonstrating that the United States can use tariffs to level the playing field for domestic workers and farmers and help reduce costs. But analysts warn that higher tariffs will force importers to pay more for Brazilian beef or switch to more expensive sources such as Australia, Argentina, Paraguay, and Uruguay.
In addition, Thomas Gremillion, director of food policy at the Consumer Federation of America, warned that the tariffs would drive up prices for staples like beef, while Congress recently voted to cut food assistance for the most vulnerable consumers.
Brazilian industry associations representing sectors such as coffee and oil, and gas have called for a diplomatic solution. "We hope that reason and balanced negotiations will prevail," said Josue Gomes da Silva, president of the São Paulo state industrial federation.
Brazilian President Luiz Inacio Lula da Silva also said he wanted a diplomatic solution to Trump's plan to impose 50% tariffs but pledged to "respond proportionately" if the tariffs take effect on August 1.
"First of all, we will try to negotiate, but if there is no negotiation, the law of reciprocity will apply," he told Record TV, referring to a law recently passed by Brazil's Congress that allows the president to retaliate against trade barriers. "If they tax us 50%, we will tax them 50%," he said.
A Brazilian diplomat, speaking on condition of anonymity, said the government was unlikely to announce retaliatory measures in response to Trump's plan. Estimated when the tariffs will be implemented. "We have until August 1," the source said.
President Lula said the Brazilian government will set up a committee with the participation of businesses to "review" its trade policy with the United States. In addition to imposing retaliatory tariffs, the law also allows Brazil to restrict imports, ban investment, and suspend intellectual property rights of US companies, among other measures.
According to the US Census Bureau, the country's top exports to Brazil last year included aircraft, spacecraft, fuel, industrial machinery such as nuclear reactors, and electrical equipment. CNN said that the 50% tariff that Brazil threatened to impose could significantly harm these US industries.
(according to Reuters, AP, CNN)