Industry closes ranks after clashes over imported steel

The reason: China is no longer exporting just basic steel products. It has begun shipping higher-value goods, competing directly with local automakers, machinery suppliers, and other industries.

The extension of Brazil’s steel import quota system until 2026 has divided opinion on trade policy. Mills argue that quotas are insufficient to curb the surge of cheap imports, particularly from China. Steel-consuming industries acknowledge that barriers raise domestic costs but are shifting the debate toward long-term competitiveness.

Antônio Sérgio Martins Mello, institutional relations director at Stellantis and vice president of automaker association ANFAVEA, stressed the need for alignment: “For us to sell cars at competitive prices, we need competitive inputs. In this debate, we are not advocating for tariff cuts on steel—that’s not the plan. The time has come to unite,” he said at the 2025 Aço Brasil industry congress.

The statement marked a turning point: a sector once resistant to tariffs now avoids pushing for tax relief and instead seeks stability in the supply chain—a reaction to the growing presence of Chinese cars in Brazil.

The machinery industry faces an even sharper dilemma. Steel accounts for about 40% of production costs, said Claudio Brizon, director at CNH Industrial. The sector depends on affordable inputs to compete globally, but according to data from the Brazilian Machinery and Equipment Industry Association (ABIMAQ), imports of ready-made Chinese equipment could exceed $10 billion in 2025.

ABIMAQ President José Velloso warns: “We also face unfair competition with Chinese products because China subsidizes, provides cheap financing, manipulates exchange rates, and grants exporters non-repayable loans.”

MRV, Brazil’s largest homebuilder, adds nuance to the picture. CEO Eduardo Fischer acknowledged that quotas raise building costs but argued that safeguarding local industry is crucial to avoid overreliance on Asia and potential problems in the future. “We must strike a balance between keeping national industry competitive without destroying it, but also ensuring it doesn’t overcharge,” he said.

Although construction firms face little direct competition from Chinese players in their end markets, they worry about long-term supply risks.

This repositioning is part of a wider trend. China has structural overcapacity in steel, machinery, autos, electronics, and energy. With the U.S. and EU tightening trade barriers, exporters are redirecting excess output to more open markets such as Brazil.

The impact is already visible. Imports could surpass 6.2 million tonnes of steel this year, equal to 30% of domestic flat steel sales.

Chinese-made cars now hold 7.8% of Brazil’s market, according to August registration data. BYD has overtaken Honda in sales, while Chinese machinery already represents nearly half the market.

Caught in the middle, the Brazilian government has sought compromise. It extended the quota system until May 2026, with a 25% tariff on imports above the cap, and expanded the list of covered products from 19 to 23. It also launched its largest-ever antidumping probe, targeting 25 steel items from China.

But the balancing act faces political hurdles. China is Brazil’s top trading partner, buying vast volumes of farm goods and minerals, as well as an ally in the BRICS bloc. Tougher trade barriers could spark retaliation. At the same time, the U.S., a key market for Brazilian steel, keeps its own tariffs in place, forcing Brazil into careful diplomatic maneuvering.

Experts say Brazil can defend its industry without alienating Beijing, but room for maneuver is limited. The solution, they argue, lies in combining defensive trade measures with industrial policy to keep China as a partner while sustaining domestic competitiveness.

According to Márcio Sette Fortes, a professor of international relations at Ibmec RJ, the Chinese push stems from weaker exports to the U.S. “China has both upgraded its product mix and redirected sales to more open regions like Latin America. Brazil can rely on antidumping, countervailing duties in cases of unfair competition, or safeguard measures when surging imports hurt domestic production,” he said.