All eyes on Bolsonaro with Lula, Trump locked in trade fight

RIO DE JANEIRO – As Brazil’s Luiz Inacio Lula da Silva and Donald Trump trade blows, the person they are fighting over has sent mixed signals to investors trying to divine who will blink first. 

Mr Jair Bolsonaro, Lula’s arch-nemesis whose legal woes were the basis of Mr Trump’s

50 per cent tariff salvo

, is barred from running against a rival who staged the kind of comeback he aspires to now. 

But all eyes are nevertheless on the right-wing former president who has spent months all but begging for Mr Trump’s help ahead of a trial on charges that he attempted a coup.

On the surface, Mr Trump’s plunge into Brazilian affairs – he called Mr Bolsonaro’s case a “witch hunt” and demanded its dismissal – looks like a shot in the arm from one nationalist to another. 

But in practice, it has put Mr Bolsonaro and his Maga-like following in a bind. Instead of energising the right, Mr Trump has opened room for similarly charismatic opponent with his own populist base to claim Americans are meddling with a still-young democracy sensitive to the idea of US interference.

That is the context in which Mr Bolsonaro is having to weigh in – and 24 hours after the geo-economic bomb dropped, he’s struggling. The usually enthusiastic influencer has been busy reposting content from others but little of his own since Mr Trump sent a tariff letter that has markets on tenderhooks.

There are, however, a pair of messages referencing two people considered potential heirs. 

One is his third-eldest son, Mr Eduardo Bolsonaro, a lawmaker who took leave from Brazil’s Congress to move to the US in March. From there, he’s spearheaded a lobbying push to convince the Trump administration to weigh in on his father’s behalf. As chance would have it, the tariffs came on the eve of his birthday.

A 41-year-old with close ties to Trump world, Mr Eduardo Bolsonaro praised the tariffs on July 9 night. On July 10 morning, his father wished him a happy birthday, lamenting the fact that they weren’t together due to the “persecution” he says his son has suffered at the hands of the Brazilian justice system.

The other is Sao Paulo Governor Tarcisio de Freitas, a former minister in Bolsonaro’s government who has begun to emerge as the favorite choice of investors pining for an alternative to Lula in next year’s election. Mr Freitas denies he will run, but he is also taken steps to win over Mr Bolsonaro, whose support he would need to earn the backing of Brazil’s fervent right. 

Mr Freitas blamed Lula for the imposition of the tariffs on July 9. By July 10, with business groups in his home state and across Brazil warning that the tariffs would cause major pain, he began calling for negotiations, according to local media.

Then, in the afternoon, Mr Bolsonaro posted a video to social media of he and Mr Freitas meeting at a traditional Brazilian barbecue joint in Brasilia, the capital. They hugged and shook hands as if to show all is well. 

“Always great to be by your side, president!” Mr Freitas wrote in his post.

It demonstrated the right’s struggles to find an answer to the suddenly rejuvenated Lula, who has seized on Mr Trump’s attacks in a push to boost approval ratings that have been stuck below 50 per cent for months. 

Some inside right-wing circles want Mr Bolsonaro to intervene to convince Mr Trump to reverse course, CNN Brasil reported on July 10. But others say there’s no immediate plan to act.

“We’ll eat popcorn and watch for the next 21 days,” Mr Sostenes Cavalcante, the leader of Bolsonaro’s party in the lower house, said in a text message on July 10, referencing the Aug 1 date on which the tariffs take effect. “Let’s wait for Lula to solve the problem.”

Lula sees little use in negotiating on Mr Trump’s terms. There’s no economic rationale, Finance Minister Fernando Haddad said on July 10, for tariffs on a country that buys more from the US than it sells – the exact relationship Mr Trump wants. 

The government also has no power to hand him what he desires: The end of legal proceedings against Mr Bolsonaro.

Instead, it plans to blunt the impact on Brazilian exports by moving closer to countries like Indonesia, Canada and Japan via Mercosur, the South American customs union of which it’s a member, according to an official with knowledge of the situation who requested anonymity to discuss internal matters.

Many of those talks have been ongoing for years, and Lula has pushed to broaden commerce beyond the US and China since Mr Trump sparked a trade war between Brazil’s top two trading partners earlier this year. 

Now the government’s position is that it’s up to Mr Bolsonaro and Mr Trump to fix the mess they’ve created.

Eventually, Mr Haddad argued, “even the far right will have to acknowledge that it shot itself in the foot.” BLOOMBERG