Brazil scrambles as 50% US tariff deadline looms, talks stall

SAO PAULO – Brazil is scrambling to avert punishing 50 per cent US tariffs that are due to start in a week’s time, but high-level talks are stalled and American companies are reluctant to confront President Donald Trump over the issue, officials and industry leaders say.

Mr Trump linked the tariffs, which he has said would come into effect on Aug 1, to Brazil’s treatment of its former president Jair Bolsonaro, who is

on trial over charges of plotting a coup

to stop Brazilian President Luiz Inacio Lula da Silva from taking office.

Mr Lula has called the threatened tariffs “unacceptable blackmail”.

No new diplomatic talks have occurred since June, and a Brazilian counter-proposal sent in May went unanswered, two diplomats with knowledge of the matter told Reuters.

Brazilian Vice-President Geraldo Alckmin told reporters on July 24 that he reiterated the country’s willingness to negotiate in a discussion on July 26 with US Secretary of Commerce Howard Lutnick.

The lack of communication has left Brazil with dwindling options as the deadline approaches.

“If he wanted to talk, he would pick up the phone and call me,” Mr Lula said of Mr Trump at an event on July 24.

The White House did not immediately respond to a request for comment.

Negotiations are complicated by US concerns over the prosecution of Bolsonaro, a Trump ally, one diplomat said, calling it a major roadblock.

Mr Trump announced the proposed 50 per cent tariffs on Brazil on July 9 despite a US trade surplus with the country – lining it up for some of the world’s very highest such tariffs, close to China’s 55 per cent rate.

In a series of 18 meetings, Mr Alckmin has urged representatives from US firms including General Motors, John Deere and Alphabet to press Washington on the issue. 

However, the companies are reluctant to confront Mr Trump for fear of retaliation, according to a government official and Mr Ricardo Alban, president of Brazil’s main industry lobby, the National Confederation of Industry (CNI).

“Things are very tense,” Mr Alban told reporters on July 24.

Also on July 24, a group of Democratic senators condemned the tariffs on Brazil as a “clear abuse of power” in a letter to Mr Trump.

The tariffs could have a severe economic impact. The CNI estimates more than 100,000 Brazilian jobs could be lost, potentially trimming 0.2 per cent from the country’s gross domestic product.

The country’s powerful agribusiness lobby, the National Confederation of Agriculture and Livestock, projects that the value of its US exports could fall by half.

Mr Alban said the potential blow to exporters could be worse than during the Covid-19 pandemic, adding that business leaders are asking the government for aid, suggesting new credit lines.

In response, some companies are already adjusting their trade strategies. Motor-maker WEG is considering a plan to use its plants in Mexico and India to supply the US, its chief financial officer told analysts.

Meat exporter Naturafrig Alimentos has begun redirecting shipments to other countries, according to commercial director Fabrizzio Capuci.

Other companies are turning to the courts. Orange juice producer Johanna Foods, for example, has sued the Trump administration over the proposed tariffs.

Companies in sectors ranging from steel to chemicals are also facing export contract cancellations, according to one adviser who asked not to be named.

Abiquim, an association that represents chemical companies in Brazil, confirmed cancellations due to the threat of tariffs, without naming the companies affected.

A lobby group representing steel companies declined to comment. REUTERS