Congress advances bill enabling Brazil to fight foreign trade barriers

Proposal inspired by U.S. law clears Senate and moves to Lower House amid Donald Trump’s tariff war

04/02/2025

The Senate approved a bill establishing legal mechanisms for the Brazilian government to retaliate against potential trade barriers or protectionist measures affecting the competitiveness of Brazilian products in international trade. Known as the Reciprocity Bill, the proposal passed on Tuesday (1) by the upper house now moves to the Chamber of Deputies for analysis.

The initiative gained traction in Congress amid the tariff war promoted by U.S. President Donald Trump. In addition to the previously announced 25% tariffs on Brazilian steel and aluminum imports, Mr. Trump is expected to unveil this Wednesday reciprocal trade tariffs targeting all countries. The U.S. president has dubbed the date “Liberation Day.”

The bill was approved by the Senate’s Economic Affairs Committee (CAE) Tuesday morning and later cleared the full Senate in an expedited process. The plenary vote became possible after the Senate president, Davi Alcolumbre (Brazil Union Party), accepted a request from Senator Randolfe Rodrigues (Workers’ Party), the government’s leader in Congress. This allowed the proposal to be immediately sent to the Lower House. If the bill had been forwarded directly from the CAE, it would have faced a five-day waiting period, as established by the internal rules.

After the vote, Lower House Speaker Hugo Motta (Republicans Party) said lawmakers could vote on the bill in the plenary session later this week. The rapporteur in the house will be Congressman Arnaldo Jardim (Citizenship Party). In the Senate plenary, the rapporteur, Senator Tereza Cristina (Progressive Party), said she hoped the Lower House would vote on the bill as soon as this Wednesday.

“As this is an exceptional matter, we are already in talks with leaders to bring it to a plenary vote this week,” Speaker Motta told reporters.

The proposal was drafted in consultation with the Ministry of Foreign Affairs, the Ministry of Industry and Trade (MDIC), and the private sector. It was inspired by U.S. legislation and grants powers to the Foreign Trade Chamber (CAMEX) to suspend trade and investment concessions, as well as obligations related to intellectual property rights, in response to unilateral policies or practices by countries or economic blocs that negatively affect the international competitiveness of Brazilian products.

The bill also aims to shield Brazil from what Senator Tereza Cristina described as “disguised protectionism,” such as the European Union Deforestation Regulation (EUDR), which will come into effect at the end of the year. The European regulation introduces unilateral measures with environmental requirements that go beyond Brazilian legislation.

The bill establishes criteria for CAMEX’s intervention in response to three types of actions by other countries: “Those that interfere with Brazil’s legitimate and sovereign choices through threats or the application of trade and investment measures; those that violate or undermine benefits granted to Brazil under any trade agreement; and those that impose unilateral measures based on environmental requirements that are more stringent than the environmental protection standards, rules, and parameters adopted by Brazil”—a clear reference to the EUDR.

The proposal also authorizes CAMEX’s Strategic Council (CEC) to adopt countermeasures, such as restricting imports of certain products or suspending concessions, either separately or cumulatively. The text indicates that these countermeasures should be “proportional to the economic impact” caused to Brazil by the initial actions of the targeted countries.

Another provision requires the Ministry of Foreign Affairs to conduct diplomatic consultations to “mitigate or nullify the effects of the measures and countermeasures.” CAMEX will also be responsible for establishing mechanisms to periodically monitor the effects of the adopted countermeasures and the progress of negotiations.

Despite the tariff dispute with the U.S. government, Senator Tereza Cristina argued during the CAE session that the bill does not encourage tariff retaliation and was drafted to apply to all countries, without targeting specific nations or blocs such as the United States or the European Union. “This bill is not a retaliation. It is a protection when Brazilian products are retaliated against,” the senator emphasized when casting her vote.

The CAE president, Renan Calheiros (Brazilian Democratic Movement), also rejected the idea that the approval of the bill constituted an attack on the U.S. but defended the tools it provides to the federal government. “It is undoubtedly a legitimate response to the American tariff hike,” Mr. Calheiros said. “We are equipping Brazilian legislation with reciprocity mechanisms. If the government chooses to adopt reciprocity measures, it will no longer lack the legal framework to do so.”

As previously reported by Valor, the senator’s bill aims to protect all Brazilian goods and products—not just agribusiness—in both economic and environmental terms. The proposal stresses the need for a “clear reaction” by the government and the adoption of a “credible mechanism” to fight barriers and protectionism.

The inclusion of room for negotiation was a new element introduced in Senator Tereza Cristina’s report and differed from the original text authored by Senator Zequinha Marinho (We Can Party). The initial proposal included the concept of environmental reciprocity and sought to create barriers for products from countries with lower environmental protection standards than Brazil’s.

*By Caetano Tonet and Gabriela Guido — Brasília

Source: Valor International

https://valorinternational.globo.com/
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Construction sustains steel demand as manufacturing industry declines

Consumers complain about high prices; producers se Chinese competition as unfair

04/01/2025

Amid weakened demand across various industrial sectors, the construction sector continues to sustain steel consumption in Brazil. Driven by housing and infrastructure projects, construction companies keep purchasing, while other segments are either scaling back or increasing imports to cut costs.

The Brazilian market is grappling with a surge of Chinese steel imports, putting pressure on domestic steelmakers’ results. Over the course of 2024, imports have reached nearly 25% of total steel consumption in some moments. However, the penetration of imports in the construction industry remained lower, as long steel products—such as rebar, bars, and profiles used in metal structures—are less vulnerable to Asian competition.

“If not for the domestic demand from the construction industry, 2024 would have been very challenging, possibly even resulting in losses,” said Silvia Nascimento, president of Aço Verde Brasil, noting that 2025 will resemble the past year, with construction continuing to uphold demand.

The construction sector has increased its steel purchases due to the growth in real estate production since the pandemic, remaining high despite rising interest rates, fueled by the My Home My Life housing program (MCMV). According to the Brazilian Construction Industry Chamber (CBIC), 60% of current steel consumption stems from real estate and 40% from infrastructure, though infrastructure projects use proportionally more steel.

In 2024, the number of new housing units launched in the country rose by 18.6%, according to CBIC, with 383,500 new units put up for sale, half of which belong to the MCMV, launches under this program increased by 44% in a year.

Companies like Gerdau benefit from this scenario, as they focus their production on long steel products. In a February interview with Valor, CFO and Investor Relations Director Rafael Japur indicated that the outlook is positive for the first half of 2025, although uncertain for the second half.

“There is uncertainty in some key sectors, such as construction, regarding the effects of a stronger interest rate hike and real estate financing,” he explained.

Rebar imports totaled 156,000 tonnes from January to September, compared to a domestic sale of 2.75 million tonnes. Although the participation is still low, it has grown since the pandemic, noted Dionyzio Klavdianos, president of the Materials, Technology, Quality, and Productivity Committee at CBIC. In 2020, the ratio was 15,200 tonnes imported to 3.28 million tonnes sold domestically.

During that period, steel shortages encouraged imports, which allowed the construction sector to “become more familiar” with foreign producers, Mr. Klavdianos said. Turkey is the largest rebar exporter to Brazil, but it can also come from Egypt and Latin American countries. Chinese producers do not have the required certification to sell to the Brazilian market, although they could obtain it if there is interest, the director argued.

“Given the increasing cost of selling to the U.S., the Chinese industry could become interested in the Brazilian market, resolve this technical barrier issue, and start to supply rebar to construction,” he pointed out.

Domestic producers remain the preferred choice in the segment as they offer high-quality materials and additional services, such as on-site support, Mr. Klavdianos explained. There is also a challenge for small construction companies to bear the cost of imported steel, which must be paid upfront, and a fear of confronting the steel industry, which could impose higher prices on Brazilian construction companies if the volume of imports rises too much. “You would still need to buy from them,” the CBIC director said.

Currently, steel is not the most burdensome material in construction projects. According to the sector’s inflation indicator, the National Construction Cost Index (INCC), rebar saw a 5.84% increase over the past 12 months, compared to a 7.32% overall indicator by March. Ana Maria Castelo, project coordinator at the Fundação Getulio Vargas’s Brazilian Institute of Economics (Ibre-FGV), noted that although other materials saw higher increases, such as PVC pipes (17.6%) and concrete blocks (8.12%), steel is extensively used in construction, so any increase is felt in the sector.

In addition to rebar, used in building foundations and infrastructure structures, steel mesh—which is placed inside the walls of low-income housing—is gaining ground, particularly in the sector that has grown the most in the country. As Mr. Klavdianos explains, this material is key for the reinforced concrete wall construction system, the most used in MCMV, because it reduces project completion time—the faster they deliver it, the quicker the companies receive funds from Caixa Econômica Federal.

The steel industry has moved to request the government to increase the import tax on wire rod, a type of steel that forms the basis for mesh—in other specifications, it is also used to make nails and wires. The matter is currently under study. According to the CBIC, 172,000 tonnes of wire rod were imported by September from the same countries producing rebar, while the domestic industry sold 1.2 million tonnes during the same period.

According to the director, despite government support for the national steel industry, increasing import costs would lead to a general rise in material prices, directly impacting construction costs and the attractiveness of the MCMV, one of its main programs.

Meanwhile, other crucial sectors for steel consumption, such as machinery and equipment, are showing reduced growth. The segment claims that rising input costs, especially domestic steel, compromise its competitiveness.

In an interview with Valor, José Velloso, executive president of ABIMAQ, said the machinery and equipment sector has been reducing its revenue—and therefore its steel demand—over the past decade, reflecting the segment’s contraction in the country. According to him, most companies are not large enough to buy directly from steelmakers due to the volume required. Over 90% of manufacturers source from distributors, paying higher prices.

“Most companies in the sector do not import steel; they are medium-sized, with a transaction volume around R$100 million. They don’t meet the minimum volume,” he explained. According to the executive, the price of the input in Brazil compared to international prices is the factor most affecting competitiveness. “The price of rolled steel increased by 12% to 17% from May 2024 to January 2025,” he pointed out.

Other representative entities, such as ANFAVEA (National Association of Vehicle Manufacturers), also advocate for local producers to lower their prices, arguing that the cost of domestic steel inflates final products and undermines competitiveness against international players. When contacted, ANFAVEA declined to comment. In this scenario, the price gap between Brazilian and international steel has gained prominence.

On the other hand, Instituto Aço Brasil—representing the country’s major steelmakers—has stated that production costs are higher due to factors like tax burdens, electricity, and logistics. Moreover, Chinese steel is subsidized by the Beijing government. The entity declined to comment on the matter.

Analyzing foreign trade data on steel imports, Rodrigo Scolaro, an economist at GEP Costdrivers, highlighted the increase in Chinese steel imports, particularly in flat steel used for industrial processes like machinery and automobile manufacturing.

“When we talk about industries importing [steel], that involves the parts industry. Last year, we had import quotas in Brazil that did not meet the desired result of curtailing imports,” he said.

According to Mr. Scolaro, while steelmakers are pressuring the government for trade defense measures, auto parts and automakers are working in the opposite direction, advocating against additional taxes on imported steel.

When contacted, SINDIPEÇAS, representing the auto parts industry, declined to comment.

The government is closely monitoring the situation. Discussions are underway in the Ministry of Development, Industry, Trade, and Services (MDIC) about potential safeguards or anti-dumping tariffs to curb the rise of imported steel, but no decision has been made yet.

*By Robson Rodrigues and Ana Luiza Tieghi — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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U.S. targets Brazil two days before tariff hike

Report mentions Brazil in six of its 397 pages; Trump aides forecast tariffs of 20% or higher

04/01/2025

The United States accused Brazil and several other countries of imposing numerous barriers against American products, in a 397-page report released on Monday (31) by the Office of the United States Trade Representative (USTR), just two days before the sweeping tariff hike announced by President Donald Trump, which he has called “Liberation Day.”

In Washington, D.C., Mr. Trump’s aides seem convinced the president is determined to impose higher tariffs. The tariff increases could reach 20%, impacting virtually all of the U.S.’s trade partners. However, aides admitted they did not know the final scope of the plan to be announced by Mr. Trump. Negotiators who have been in Washington said they would not be surprised if the tariff hike reaches 25%.

On this so-called “Liberation Day,” the “reciprocal tariffs” regime could generate an additional $600 billion per year in revenue for the U.S., or $6 trillion over a decade, according to Peter Navarro, a hardline advisor close to Mr. Trump. On top of this, an additional $100 billion per year would come specifically from a 25% tariff on foreign automobiles.

Although Brazil argues it has a trade deficit with the U.S., nearly six pages of complaints against Brazilian trade practices in the USTR report pave the way for higher tariffs on Brazilian products under the principle of reciprocity.

The Trump administration argued in the document that Brazil “imposes relatively high tariffs on imports across a wide range of sectors, including automobiles, automotive parts, information technology and electronics, chemicals, plastics, industrial machinery, steel, and textiles and apparel.”

It also complained that Brazil’s bound tariff rates are often much higher than the applied rates, creating significant uncertainty for U.S. exporters in the Brazilian market, as “the government frequently modifies tariff rates within the flexibilities of MERCOSUR.” The USTR added: “The lack of predictability with regard to tariff rates makes it difficult for U.S. exporters to forecast the costs of doing business in Brazil.”

The “2025 National Trade Estimate Report” was submitted to Mr. Trump and Congress. Jamieson Greer, head of the USTR, said that no American president in modern history had recognized the comprehensive and harmful foreign trade barriers faced by U.S. exporters more than President Trump. He added that, under the president’s leadership, the administration was working to address what he sees as unfair and non-reciprocal practices, seeking to restore fairness and put American companies and workers first in the global market.

The USTR noted that trade barriers are not fixed in their definition but can broadly include “laws, regulations, policies, or government practices—including non-market policies and practices—that distort or impair fair competition.” These include measures that protect domestic goods and services from foreign competition, artificially promote exports of specific domestic goods and services, or fail to provide adequate and effective protection of intellectual property rights.

In the pages dedicated to Brazil, the U.S. highlighted ethanol tariffs as the primary barrier. It noted that between 2011 and 2017, the bilateral ethanol trade was virtually duty-free. However, Brazil then imposed tariffs, initially at 20%, followed by the establishment of a quota that reduced what had been “robust” trade, and in 2018 set the tariff at 18%​.

“The United States continues to engage with Brazil to lower its ethanol tariff to provide reciprocal treatment for trade in ethanol between the United States and Brazil,” the document said​.

The report also raised other complaints. One relates to the Industrial Product Tax (IPI) of 16.25% ad valorem applied to cachaça, while other alcoholic beverages, including U.S. imports, are subject to a 19.5% IPI​.

It noted that, in the audiovisual sector, Brazil imposes several taxes on foreign products that do not apply equally to domestic products. It also pointed out that remittances to foreign producers of audiovisual works are subject to a 25% withholding tax​.

The USTR complained that Brazil restricts the entry of certain types of remanufactured goods, such as earthmoving equipment, automotive parts, and medical equipment. With a few exceptions, Brazil generally prohibits the importation of used consumer goods​.

It also mentioned automatic and non-automatic import licensing, inconsistent documentation requirements for importing certain types of goods, regulations on biofuels, sanitary and phytosanitary barriers, and obstacles to foreign companies’ participation in government procurement processes. Furthermore, it questioned Brazil’s enforcement of intellectual property rights, efforts to combat piracy, and barriers to the acquisition of services and digital trade​.

Ongoing dialogue

Talks between Brazil and the U.S. continue. A phone call was scheduled for Monday (31) between Foreign Minister Mauro Vieira and the USTR head, Jamieson Greer. The call was seen as part of these ongoing negotiations, but no major breakthrough was expected. Neither side issued a statement about the content of the conversation or whether it actually took place.

As Valor reported on Saturday, in the midst of uncertainty in Washington, American signals pointed to specific issues involving Brazil.

The country is unlikely to escape new tariffs. Mr. Trump—and not only him in Washington—is fixated on Brazil’s ethanol import tariff of 18%, compared to 2.5% in the U.S. When he signed the executive order to prepare reciprocal tariffs, the first country he mentioned was Brazil, and the first product was ethanol.

On Wednesday, no exceptions were expected in the case of steel—meaning there would be no quotas requested by Brazil, at least initially. It remains unclear whether there will be exceptions for other so-called reciprocal tariffs. Six days ago, Mr. Trump said he did not want “too many exceptions” in the package—but he could always change his mind at the last minute.

A potential deal trading lower ethanol tariffs in Brazil for a quota on U.S. semi-finished steel exports will likely remain on the radar in Brasília and Washington after April 2.

*By Assis Moreira  — Geneva

Source: Valor International

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