Plan to counter U.S. tariff aims to limit hit to Brazil’s economy

In recent days, the federal government has been estimating the effects the tariff could have on Brazil’s key economic indicators. One government official said the measure is likely to weigh not only on economic activity but also on inflation. This downward pressure on prices would stem from both weaker GDP performance and greater availability of goods in Brazil, since exports to the U.S. would decline. Another official said sector-specific impacts could pose a problem, although the overall effect on the economy is likely to be marginal.

Still, technical staff see the economic outlook as highly uncertain. Variables such as exchange rate behavior, market reaction, possible retaliation against the United States, and the extent of federal government support for affected sectors remain unclear.

“Not even last year’s floods in Rio Grande do Sul managed to slow GDP growth much,” one official said. At the time, the federal government launched a series of recovery measures for the state, including wage payments by the federal treasury to help companies retain workers, emergency credit lines, and funding for housing reconstruction and responses to environmental and social impacts. The government said then that the total primary impact would reach R$7.7 billion, which would be excluded from the fiscal target.

In the case of the contingency plan for the tariff, one of the priorities will be addressing companies by size. Valor has learned that the presidential palace is particularly concerned about the large number of small and medium-sized enterprises that export to the U.S. and employ many workers. According to data from the Ministry of Development, Industry, Trade and Services (MDIC), 2,043 microenterprises and individual microentrepreneurs in Brazil exported goods to the United States last year, compared to 1,448 that sold to the European Union. Among small businesses, 1,608 exported to the U.S. and 1,272 to the EU. For medium and large companies, the split is more even: 5,903 to the U.S. and 5,875 to the EU.

Job protection and subsidized credit

Other components of the plan include job protection measures and subsidized credit for the most affected companies and sectors. In the initial stage of discussions, the ministries of Finance, Development, Industry, Trade and Services, Planning and Budget, and Labor and Employment were involved.

Last week, Finance Minister Fernando Haddad said the plan “will not necessarily imply primary spending.” “In the case of Rio Grande do Sul, the smallest portion of the investment to rebuild the state’s economy came from primary spending. Most of it went to support affected businesses,” he told radio station CBN.

In addition, Mr. Lula is expected to officially sign the Acredita Exportação program this Monday (28) in a ceremony at the presidential palace. While not formally part of the contingency plan, the program will reimburse micro and small enterprises for 3% of their foreign sales revenue.

The MDIC said this amount “corresponds to the portion of taxes paid along the production chain” by these businesses. The program was introduced by the MDIC and the Ministry for Entrepreneurship, Micro and Small Enterprises in October 2024 and approved by Congress earlier this month, before U.S. President Donald Trump’s announcement.