Brazil may cut tariffs on U.S. machinery in talks

“A small number [of items] was offered as a starting point for negotiations,” a Brazilian government source said Monday (8). Talks are expected to move forward this week.

The list may include some items whose import tax rates were raised in February by decision of the Executive Management Committee (Gecex) of the Foreign Trade Chamber (Camex). These are machinery and information technology goods that have similar products made in Brazil.

As Valor reported, the increase in import tariffs would generate R$14 billion in additional revenue this year.

The list being negotiated with the U.S. government also includes products that have no similar goods made in Brazil and are manufactured by the United States, said a person familiar with the talks.

The list was presented during a meeting between technical teams from the two countries, when Brazil laid out some possibilities within the tariff agenda on which it is willing to move forward. The proposals are now being assessed by the U.S. government. Any negotiation involving Pix, Brazil’s instant payments system, for example, is ruled out by the Brazilian side.

The talks are being held within the bilateral working group created after the May 7 meeting between Presidents Luiz Inácio Lula da Silva and Donald Trump.

Negotiations expected to continue

The 30-day deadline initially set for the group’s work ended Sunday (7). However, the expectation is that negotiations will continue in the coming weeks, at least until July 15, the scheduled date for the conclusion of the administrative process conducted by the U.S. that could result in a 25% surcharge on part of Brazilian exports. During this period, Brazil will try to build a negotiated solution capable of preventing the measure.

Last week, the Office of the United States Trade Representative (USTR) released its preliminary conclusion on investigations conducted under Section 301 of the Trade Act, which allows tariffs on products in response to practices deemed harmful to the competitiveness of U.S. products.

Launched in July last year, the investigation covers issues ranging from Pix to illegal deforestation, the fight against corruption, and commerce on 25 de Março Street, a major shopping area in São Paulo.

For now, the 25% tariff resulting from the investigation is a recommendation. The Brazilian government believes at least one or two more meetings of the bilateral working group will be needed to determine whether there is room for an agreement that could avoid the tariff increase.

Affected sectors

Alongside negotiations with Washington D.C., the Ministry of Development, Industry, Trade and Services (MDIC) is expected to resume sectoral working groups with the private sector, following the same model used during the first tariff round.

The government believes it will be necessary to mobilize the sectors potentially affected to discuss trade-protection strategies and monitor the impact of the U.S. measures.

As Valor reported, MDIC has already started talks with some segments and plans to broaden the dialogue in the coming days. Meetings are planned with representatives of the footwear industry, as well as new talks with entities such as the American Chamber of Commerce for Brazil (Amcham Brasil) and the National Confederation of Industry (CNI).

In addition, some Brazilian products may also be subject to an additional 12.5% tariff applied by the U.S. to about 60 countries on the grounds of failures to combat the entry of goods produced with forced labor.