Brazil, U.S. resume trade talks as Trump tariffs bite

Economist Paul Krugman warns of inflation and false victories in new protectionist wave

04/11/2025

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Brazil and the United States held their first negotiations since U.S. President Donald Trump’s sweeping tariff hike, which added a 10% duty on all Brazilian exports. According to sources, the two sides met on Thursday to discuss two main issues: clarifying the scope of the so-called “reciprocal tariffs” and securing continued access for Brazilian steel in the American market.

The Brazilian government is still pushing for the reinstatement of quotas imposed during Mr. Trump’s first term, including the 3.5 million-tonne cap for semi-finished steel, which serves as raw material for U.S. steelmakers.

Negotiators from both countries exchanged ideas on how to move forward, and a new round of talks is expected to be scheduled.

As previously reported, the Trump administration is still concerned about Brazil’s 18% import tariff on ethanol, which contrasts with the 2.5% duty applied by the U.S. It is widely expected that ethanol and steel may ultimately be bundled into a single deal, creating a trade-off that would appeal to both Brasília and Washington.

Mr. Trump is rushing to secure bilateral agreements under increasing pressure from segments of the U.S. private sector, even as the economic fallout from his trade policies continues to mount.

Last week, Mr. Trump presented tariff changes dramatically, displaying them on a large cardboard sign in the White House Garden. Although some duties have been slightly reduced—for example, the European Union will face a 10% tariff instead of 20% over the next three months—others have soared. Tariffs on Chinese imports, the third-largest source of U.S. trade after Canada and Mexico, have jumped to over 130% from 34%. High tariffs also remain on steel and aluminum.

Nobel Prize-winning economist Paul Krugman warned that claims of a tariff reduction miss the bigger picture. He pointed to an analysis by Yale’s Budget Lab, which suggests that the April 9 tariff regime could increase consumer prices even more than the April 2 package.

According to the report, Mr. Trump’s decision to apply a uniform 10% tariff to all countries, while sharply escalating duties on Chinese goods, is expected to raise U.S. consumer prices by 2.9%. That’s nearly ten times the estimated impact of the infamous 1930 Smoot-Hawley tariff, which helped turn a recession into the Great Depression and contributed to a rise in nationalism and global conflict.

Mr. Krugman questioned what the U.S. is even trying to negotiate. In many cases, he argued, other countries have no trade barriers to remove. He recalled that Mr. Trump’s trade advisor, Peter Navarro—mocked by Elon Musk as an “idiot”—has insisted that value-added taxes (VAT) are effectively tariffs. “They’re not,” Mr. Krugman said, adding that EU countries cannot afford to eliminate them.

In Mr. Krugman’s view, foreign governments may offer symbolic concessions that Mr. Trump will brandish as real victories. He cited Mr. Trump’s earlier trade deal with China during his first term, which he claimed involved major concessions from Beijing—claims that later proved false.

“In fact, American soybean producers never fully regained their lost market share,” Mr. Krugman noted. “And remember how Trump made minor tweaks to NAFTA and then claimed to have secured an entirely new trade agreement with Mexico and Canada.”

By Assis Moreira, Valor — Bordeaux

Source: Valor International

https://valorinternational.globo.com/