Brazil’s trade isolation exposed as tariffs reshape global markets

Currently, just 13% of Brazilian exports are covered by trade agreements, compared to 60% in most other countries, according to Lucas Ferraz, head of the Global Business Center at FGV EESP and former secretary of foreign trade. “When a country has few trade deals, its products lose competitiveness in foreign markets because they’re subject to tariffs that others aren’t,” he said. “The entire world is being hit by Trump’s tariff bullying, and that puts us in an even tougher spot.”

While expanding trade agreements is not a quick fix, it’s becoming increasingly necessary, said former development minister Armando Monteiro. “This fallout with the U.S. and the post-Trump trade landscape will force Brazil to broaden its network of agreements and improve access to multiple markets,” he said. “It won’t be easy to reroute exports in the short term, but this is a long-term imperative.”

Among the most significant deals on the table is the long-awaited Mercosur–European Union agreement, which would create a market of 750 million consumers and raise the share of Brazil’s trade under agreements to 30% from 13%. The agreement was finalized last year, and the government anticipates signing it by the end of 2025.

A new variable emerged last week when the U.S. struck a deal with the EU. “We need more time to assess how this will impact the Mercosur agreement,” said Mr. Ferraz. “Agricultural resistance may increase, but pressure from European industry could push for a faster internalization of the deal.” Mr. Monteiro sees this internal balance tipping slightly in favor of moving the deal forward.

Mexico, Canada, and EFTA among Brazil’s top trade targets

Mexico is another priority. Although both countries are members of the Latin American Integration Association (ALADI), Brazil and Mexico have limited bilateral agreements—three in total, two covering the automotive sector and one economic cooperation pact. Minister of Development, Industry, Trade and Services, Geraldo Alckmin, is planning a trip to Mexico later this month to explore ways to expand the relationship, which has long been on the diplomatic agenda.

The Trump tariff shock may also help advance the Mercosur–EU deal and other pending agreements, including with Canada, Singapore, and EFTA (Norway, Switzerland, Liechtenstein, and Iceland). Mr. Monteiro argued that Brazil should reconsider its commitment to negotiate only as part of Mercosur, a rule that has often hindered deal-making. Argentina’s new president, Javier Milei, has diverged from the bloc’s traditional positions, and Uruguay has long advocated for unilateral negotiations.

“If Brazil were no longer bound to Mercosur in trade talks, it could pursue agreements with countries also looking for new partners in light of the partial closure of the U.S. market,” Mr. Monteiro said. “Brazil needs to shift gears—use this moment of difficulty to reorient its trade policy and expand its bilateral agreements.”

Brazil’s advantages in such negotiations include the size of its domestic market and its diversified economy. The idea of ending the bloc-only negotiation clause has been debated for years, including during José Serra’s tenure as foreign minister under President Michel Temer. But under Workers’ Party governments, Mercosur has remained a pillar of Brazil’s foreign policy.

Mr. Monteiro believes today’s circumstances call for a more assertive stance. One of his chief concerns is the outcome of ongoing trade talks between the U.S. and China, which together account for 40% of Brazil’s exports. “If the Americans gain broader access to China’s food market, it would mean more competition for Brazil.”

Lack of trade deals also hinders investment and diversification

Mr. Ferraz warned that Brazil’s limited trade ties not only hurt exports but also deter foreign investment. “There’s growing evidence that countries with more trade agreements attract more investment—they’re better positioned to become export platforms to other key markets,” he said. “Those without access to major markets are left out of this new global chessboard, this reconfiguration of supply chains.”

He criticized Brazil’s historical reluctance to pursue trade deals, noting that the country’s engagement has fluctuated over time but never reached the level of urgency seen today.

Seeking new markets is now one of several measures Brazil is deploying in response to the 50% tariff hike Mr. Trump announced on July 30. Other steps mentioned by Mr. Alckmin and Finance Minister Fernando Haddad include a contingency plan to support affected companies, opening a negotiation channel with the Trump administration, and challenging the tariffs in U.S. courts and international forums.