By Beatriz Reis, Daniel Carvalho, Alicia Diaz and Hadriana Lowenkron.
The US decision to impose 25% tariffs on Brazil has reignited a trade dispute with President Luiz Inacio Lula da Silva’s government just months before October’s presidential election, potentially shaping the outcome of a deeply polarized race.
While the Trump administration said the tariffs, due to take effect on July 22, were in response to unfair trade practices, their biggest impact may prove political.
Lula, as Brazil’s president is known, has successfully rallied public opinion behind him when faced with earlier US trade pressure. He is set to face off with right-wing Senator Flavio Bolsonaro, who flew to the US earlier this month to testify against the trade penalties then under consideration, saying they’d only help the leftist leader’s re-election bid.
“The proposed tariffs would reward the very offenders they are meant to punish,” Bolsonaro wrote in his submission to the Office of the US Trade Representative.
Those appeals from the son of former President Jair Bolsonaro, an ally of Donald Trump, appear to have been set aside during the US investigation. Brazilian business groups have already started criticizing the measure, warning it could deal a significant blow to the country’s exporters.
The yearlong inquiry “found a number of Brazil’s practices to be unreasonable and discriminatory, restricting the competitive position of American farmers, workers, innovators, and exporters,” the Office of the US Trade Representative said in a post on X late Wednesday.
US Trade Representative Jamieson Greer said the action was necessary “to address these unfair trade practices to ensure American workers and companies can compete on a level playing field.” The US remains open to negotiations to address the issues identified, he said in a statement.
Amcham Brasil, the American Chamber of Commerce for Brazil, said the tariffs would place Brazil among the countries facing the most restrictive conditions to access the US market, affecting more than $11 billion in industrial and agricultural exports.
Imports of coffee, beef, and certain ethanol products would be exempt from the new duties, a senior administration official told reporters ahead of the announcement. Ethanol would be subject to the new tariffs, however. The country’s National Confederation of Industry, known as CNI, also raised concerns, noting that 20 of Brazil’s 27 states saw exports to the US decline in the first half of the year.
While exempting key Brazilian exports potentially limits the fallout for Latin America’s largest economy, the politics look harder to set aside.
Lula’s poll ratings rose after he cast US pressure as an attack on Brazil’s sovereignty, and he’s now been gifted a potent line of attack against his opponent, whose father sat at the center of Trump’s initial efforts to hammer Brazil with trade levies.
Lula’s campaign will revive the strategy it adopted when the tariffs were first announced in early June, instructing its supporters to use social media to link the tariff hike to Bolsonaro, reinforcing the narrative that he betrayed the country, according to a person involved in the plan.
The campaign plans to center its messaging on the slogan “TariFlávio,” the person said, asking not to be named because they were not authorized to discuss campaign strategy publicly.
“It does not look good for Flavio as his visit to the US didn’t really prevent the outcome,” said Dan Pan, an economist at Standard Chartered Bank in New York. “It could even give Lula more firing power against Flavio amid his close ties with the Trump administration.”
Markets largely shrugged off the news, with the Brazilian real opening lower in line with other emerging-market currencies following the US tariff announcement.
‘No justification’
Brazil’s government denounced the tariffs and said it would take measures to insulate its economy from their effects. It also accused the Bolsonaro family of working with the US government to enable them.
“There is no justification for unilateral measures against our country,” the government in Brasilia said in a statement. “We will continue to diversify our trade partnerships and open new markets for our products.”
Lula’s administration will meet Thursday morning to discuss the situation and how it plans to invoke Brazil’s reciprocity law, according to a person familiar with the matter. This allows the government to adopt countermeasures against countries that implement hostile unilateral trade practices.
The US administration proposed an additional 25% duty on imports from Brazil in a June 1 report following an investigation pursued under Section 301 of the Trade Act of 1974. The report specifically calls out the central bank’s electronic payments service known as Pix which is used by millions of Brazilians every day.
The US argued that Brazil has “unfairly disadvantaged” US providers of electronic payment services by adopting policies that favor Pix, a platform Lula has repeatedly portrayed as a symbol of technological sovereignty and financial independence.
Brazil said the allegations related to Pix had no merit, and vowed to pursue reciprocal tariffs and relief via the World Trade Organization.
In his submission, Flavio Bolsonaro also defended Pix, describing it as “one of the hallmarks of Jair Bolsonaro’s administration.”
In a post on X, Secretary of State Marco Rubio accused the Brazilian government of not negotiating in good faith. He said Lula’s “economic policies are bad for Americans and bad for Brazilians. For the past year, Lula has put his own ego ahead of making a deal for the welfare of the Brazilian people, and these tariffs are the price for that.”
Flavio Bolsonaro retweeted Rubio’s post.
Last year, Trump imposed 50% tariffs on a broad range of Brazilian goods in an effort to pressure Brazilian authorities over the prosecution of Jair Bolsonaro, who is under house arrest serving a 27-year sentence for attempting a coup following his 2022 election defeat to Lula.
Most of those duties were later rolled back after negotiations between Brasília and Washington, in a diplomatic victory for Lula.
The stakes are also high for US exporters, which last year sold more than $45 billion of goods to Brazil.
Despite the escalating dispute, both governments are still trying to avoid a broader trade conflict. Greer has met repeatedly with Brazil’s Trade Minister Márcio Elias in recent months to seek a resolution. Lula’s government intends to keep negotiating, but has ruled out concessions it considers politically or legally unacceptable, including changes to Pix, according to a person familiar with the talks.
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