Brazil-China trade triangulation unlikely, despite U.S. criticism

The inclusion of Brazil on a list of countries that the United States accuses of helping China evade tariffs imposed by the White House on the Asian giant is another move with shaky grounds in an aggressive U.S. foreign policy toward Latin American governments in general and Brasília in particular.

This month, the White House published a report on what it considers the growing challenge of “illegal transshipment,” particularly of Chinese goods, through third countries. The document lists and classifies 40 countries accused of engaging in the practice.

Brazil was placed in Tier 2, or “Scale Leaders,” defined as countries with significant economic integration with China. The group also includes Indonesia, Malaysia, Thailand, Turkey, and Vietnam.

According to the White House, these countries combine significant illegal transshipment volumes with deeper integration into China-linked supply chains, input sourcing, manufacturing platforms, logistics systems, or regional rerouting channels.

“These countries possess sufficient industrial scale, port capacity, supplier infrastructure, manufacturing depth, or logistics capacity to move significant volumes of China-linked goods into U.S.-bound trade flows,” the report says.

Brazil and Turkey, specifically, are described by the White House as larger regional production and logistics platforms capable of supporting rerouting or transformation operations in selected product categories. The report provides no examples.

Brazil is also cited, along with Argentina, Chile, Colombia, and Peru, as part of a “Latin American corridor” for illegal transshipment.

Experts say the triangulation of Chinese goods is not a new issue. With the U.S. tariff offensive against China, they say, it is possible that Chinese companies are seeking other countries to access the U.S. market at lower cost. But the argument makes more sense for neighboring Vietnam, for example, than for Brazil.

Brazil, they point out, is the second-most heavily tariffed country by the U.S., behind China itself and tied with Turkey, making it far from an ideal location for transshipment.

A Valor analysis comparing products that Brazil imports from China with those it sells to the U.S. shows that the “common trade” among the three countries accounts for a relatively small share of Brazil’s exports to the U.S., representing less than 6% of the total.

The White House report cites a series of studies estimating the cost of transshipment to the U.S. Treasury. One study, by the White House Council of Economic Advisers (CEA), estimates potential illegal transshipment in 2025 at between $34.2 billion and $89.6 billion.

The CEA calculation uses a methodology developed by Caroline Freund, director of the University of California San Diego’s School of Global Policy and Strategy and an international trade specialist, in a study titled “The China Wash: Tracking Products to Identify Tariff Evasion Through Transshipment.”

Freund’s research, however, does not cite Brazil. She told Valor that the country makes little sense as a hub for transshipping Chinese goods to the U.S. for three reasons. One is that U.S. tariffs on goods manufactured in Brazil are high, while Brazil’s own import tariffs also tend to be high.

“It would be difficult to gain a tariff advantage through transshipment via Brazil. In other words, the purpose of transshipment is precisely to avoid tariffs, but Brazil’s high import tariffs, combined with high U.S. tariffs on Brazilian products, make that impossible,” she said.

The second reason is that Brazil is not a convenient option from a transportation and logistics standpoint. “A route that went through China and Brazil would be costly, as Brazil is not on the way,” Freund said.

Finally, she notes that Brazil is not a major exporter of manufactured goods.

“In line with that, U.S. imports from Brazil declined between 2024 and 2025,” Freund said. On the Brazilian side, exports to the U.S. fell nearly 7% year over year, according to data from Brazil’s Ministry of Development, Industry, Trade, and Services (MDIC).

However, analysts unanimously agree that President Donald Trump’s tariff policy—motivated, at least in part, by U.S. irritation over China’s presence and trade partnerships in Latin America—is in fact pushing Brazil toward Asia.

“Brazilian banks and officials will do what is needed to preserve the country’s access to the U.S. financial system. But the current trajectory raises the odds that, over time, more Brazilian firms will prefer a counterparty with nothing at stake in that system—a Chinese supplier, bank, or financier,” James Story and Ricardo Zúniga wrote for the Atlantic Council think tank.

They are referring not only to the U.S. tariff campaign against Brazil but also to the U.S. approach to security in Latin America.

Also this month, U.S. Defense Secretary Pete Hegseth said the U.S. military is preparing to conduct operations in the territory of allied countries to combat drug-trafficking organizations in Latin America. According to him, groups designated as terrorist organizations, together with partner governments, will be legitimate targets of the United States government.

The statement sparked uncertainty in the Brazilian press, as the U.S. government has officially designated the Brazilian criminal groups Primeiro Comando da Capital (PCC) and Comando Vermelho (CV) as terrorist organizations, but the designation has not been recognized by the Brazilian government, nor has any bilateral cooperation agreement been signed to combat the groups. The Defense Department did not respond to requests for clarification about Hegseth’s remarks and their implications for Brazil.

“Coercion is rarely successful with Brazil. Each measure meant to remedy a problem the [U.S.] administration has identified in Brazil instead reinforces the perception that the safer long-term bet is to lean less on the United States,” Story and Zúniga wrote.

Story was a U.S. Foreign Service officer in Brazil, while Zúniga served as U.S. consul general in São Paulo and as principal deputy assistant secretary in the State Department’s Bureau of Western Hemisphere Affairs. That branch of the U.S. State Department, which covers Latin America, has just received a new leader with the appointment of Republican billionaire businessman Juan Pablo Segura.

Some analysts believe that appointing a permanent head to a senior position that had remained under an acting official since 2025 could help improve communication between public- and private-sector players in Brazil and the U.S. But Segura has also previously made strong public criticisms of Brazil, particularly of Federal Supreme Court Justice Alexandre de Moraes.

“Beijing brings its own hazards and opacity, yet Washington is increasingly seen as the more erratic and unreliable partner,” Story and Zúniga wrote.

*By Anaïs Fernandes and Álvaro Fagundes — Washington and São Paulo

Source: Valor International

https://valorinternational.globo.com/