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Exporters propose emergency measures against Trump tariffs

Proposals call for tax rebates, credit lines as Lula administration distances plan from Bolsonaro-era model

08/01/2025

Brazilian exporters hit by the tariff hike imposed by U.S. President Donald Trump have submitted proposals for the federal government’s emergency support package, with the expectation that the aid will remain in place at least through much of next year. Companies involved said the contingency plan should last a minimum of six months, with the possibility of a six-month extension, and may include financing lines from the Brazilian Development Bank (BNDES).

While ministries leading negotiations with the U.S. have not committed to a specific duration, companies were told that support measures could be rolled out in phases—short, medium, and long term—allowing for an assessment of their impact. Two sources said that although many of the suggestions resemble elements of the COVID-19 relief plan from Jair Bolsonaro administration, the current government insists the initiative is different.

“They don’t want comparisons between the two, and argue that these are different measures for different times. But part of our proposals is based on that previous plan simply because it was tested and worked. Let’s say it’s a ‘mini menu’ from the pandemic playbook. And there’s no political element on our side,” said one industry executive involved in the talks.

Executives also said the 694 product exemptions announced by the U.S. on Wednesday (30) will not alter the framework already designed by the Finance and Development ministries. “That was the response we received when we raised the issue with government officials,” said one source.

The proposals aim to minimize reliance on direct funding from the federal budget, given Brazil’s tight fiscal situation, and to prioritize support for companies in the most critical condition, a criterion that industry groups admit leaves room for interpretation.

 

Smaller companies support

One key concern is support for smaller companies with limited financial capacity. Another involves distinguishing between companies that will halt exports immediately and those that will continue shipping to the U.S. despite losses due to lack of alternatives.

Some companies, for instance, produce goods in Brazil specifically tailored to the U.S. market and cannot easily redirect them elsewhere.

Among the proposals is a special line of credit to cover the Advance on Foreign Exchange Contract (ACC), in which banks provide exporters with upfront payment in foreign currency. The proposed measure would create a special dollar-denominated loan program through Brazil’s official financial system, including BNDES, to support transactions that fall through.

“This would be a special credit line for companies stuck with unsold goods, using international market rates and no subsidies. It would help those who produced and even invoiced, but didn’t ship,” said a leader in the textile sector. Another source noted that the proposal includes administrative costs and avoids drawing on federal funds.

Another request sent to the Finance and Development ministries involves raising the minimum Reintegra rate—Brazil’s Special Regime for the Reinstatement of Tax Amounts for Exporting Companies—from 0.1% to 3% for medium-sized businesses. This measure would apply to companies that continue exporting to the U.S.

Associations are also asking the government to extend the 3% rate to larger companies, but it’s unclear whether this proposal has gained traction in Brasília.

This would match the rate recently approved for individual microentrepreneurs, microbusinesses, and small enterprises, as published in the Official Gazette on Tuesday (29).

Another long-standing demand resurfacing is the acceleration of ICMS (state value-added tax) refunds owed to exporters, a request coming from sectors such as meat, wood, textiles, and fruit.

Industry associations are drafting a letter to state governments, backed by companies exporting to the U.S., to address ICMS credit reimbursements. The government of São Paulo has already pledged R$1 billion in ICMS refunds to help mitigate the tariff impact.

Wage cuts

One common theme among industry proposals is the possibility of reducing working hours and wages, with partial government subsidies, similar to the model adopted during the COVID-19 crisis. However, sources said the Finance Ministry is resistant to this idea due to its cost.

Under that previous scheme, companies paid part of employees’ wages, while the government covered the remainder.

 

One new idea is implementing a four-day workweek, with the fifth day counted as a “banked hour” to lower output. These labor-related proposals reportedly came from the National Confederation of Industry (CNI).

“It’s unfortunate we might need this, but it would be for a short period and limited to a few sectors. We believe it will be smaller in scope than during COVID, since this is an emergency situation,” said an executive who attended a July meeting with the Ministry of Development.

As of Thursday (31), representatives from the coffee, meat, wood, textile, and footwear sectors had already submitted proposals during meetings between ministries and industry leaders. But other affected sectors—subject to the 50% tariff hike—can also present suggestions.

Products such as coffee, fruit, meat, and manufactured goods are subject to an additional 40% tariff, on top of the existing 10%.

On Thursday, Vice President and Development Minister Geraldo Alckmin said the government’s action plan is “practically ready,” but still under review since the tariff details were released only a day earlier. He said President Lula will make the final decision, and the plan will involve financial, credit, and tax-related measures.

Hardest-hit sectors

While fewer sectors were hit by the new 50% tariff—around 700 products were exempt and kept at 10%—industries with significant economic and political weight in Brasília, like agribusiness, were included and spoke with Valor over the past few days.

These affected sectors account for 36% of Brazil’s exports to the U.S. by value, the Ministry of Development said after updating its figures based on the exemption list.

 

The main challenge is that few of these goods can be redirected to other international markets in the short term, due to limited storage capacity abroad and potential downward pressure on global prices. This is the case for meat, fish, and fruit, which are already feeling the impact.

Before orange juice was included in the exemption list, European buyers tried renegotiating contracts, offering $1,000 per tonne, even though the average price between January and June was $2,600.

Redirecting goods to the domestic market could also depress prices, revenues, and profit margins. This applies not just to perishables, but also to sectors like textiles, footwear, and furniture.

Furniture exported to the U.S. from Brazil, for instance, is designed specifically for American consumers, said the Brazilian Furniture Manufacturers Association (ABIMÓVEL). With this context in mind, industries are pushing for the government to finalize the plan quickly.

The Ministry of Finance declined to comment. The Development Ministry, led by Mr. Alckmin, said through its press office: “Since the U.S. government announced the imposition of tariffs on Brazilian exports, the federal government has met with representatives from all productive sectors, gathering assessments and proposals. The government is deepening its dialogue to define measures that protect jobs and support companies. The MDIC will organize meetings with the most affected sectors.”

The Presidential Communications Secretariat did not respond by press time.

Jéssica Sant’Ana, Lu Aiko Otta, Sofia Aguiar, and Renan Truffi contributed reporting from Brasília.

By Adriana Mattos  and Fernanda Guimarães  — São Paulo

Source: Valor International

https://valorinternational.globo.com/

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Trump tariffs, EU law disrupt Brazil’s agricultural geopolitics

Shifts in global trade threaten competitiveness and cloud sector planning

 

 

 

07/14/2025

As Brazil’s agribusiness prepares to comply with the European Union’s anti-deforestation law set to take effect in January 2026, the sector now faces a new challenge: a 50% tariff on exports to the U.S. Experts in foreign trade and diplomats with experience in trade negotiations warn that this “perfect storm” could make exports to two of Brazil’s largest markets— the U.S. and the EU—unviable or severely undermine their competitiveness.

According to Ambassador Rubens Barbosa, president of the Institute of International Relations and Foreign Trade (Irice), trade tensions with the U.S. are more serious than the effects of the EU regulation and present a more immediate concern for Brazil.

He notes that in the dispute with the U.S., agribusiness is not the most impacted sector of the Brazilian economy. Mr. Barbosa believes industries like aviation, aluminum, and steel, which export higher value-added and high-tech products, stand to lose more, while agribusiness remains a strong commodity exporter.

“There will be consequences, but we don’t yet know what tariff level Brazil will negotiate with the U.S. Even if it ends up above the previous 10%, we could still remain competitive in agricultural exports, but we’ll need to negotiate,” Mr. Barbosa told Valor.

Still, there are products whose exportation could become unfeasible, such as beef, where the price per tonne could jump by about $3,000, according to projections from Agrifatto. Coffee, orange juice, and eggs are also expected to see shipments severely impacted.

The U.S. remains one of Brazil’s key trade partners, accounting for 12% of exports and 15.5% of total imports in 2024. “If Brazil escalates retaliation, as China did, it could backfire. We have more to lose than gain,” warned Cicero Zanetti de Lima, a researcher at FGV Agro, the agribusiness studies center at Fundação Getulio Vargas.

Roughly 30% of Brazilian exports to the U.S.—about $12.1 billion—come from agribusiness. Conversely, agricultural imports from the U.S. represent just 2.5% of Brazil’s total, primarily inputs. Mr. Lima explained that more expensive U.S. inputs could push up domestic food prices in Brazil.

“Another serious issue is that, with the tariff in place, it will be nearly impossible to divert products like coffee and orange juice originally bound for the U.S. to other markets. This is a red flag,” he said.

Like the U.S., the EU is also one of Brazil’s biggest buyers of coffee and orange juice. With rising protectionist signals, the European Commission has classified Brazil as a standard risk country under the EU Deforestation Regulation (EUDR), which bans imports of products originating from both illegal and legally permitted deforestation under Brazilian law.

There is widespread uncertainty about the required documentation and how the law will be enforced. Rubens Ricupero, a diplomat and former finance minister, highlighted that Brazil’s agribusiness is vulnerable on deforestation issues. He argued this should be an opportunity to crack down on illegal deforesters and reduce Brazil’s risk classification under the EU law. “The sector itself should take the lead in showing it is serious about this issue,” he said.

Because Brazil was rated as a standard risk country under the EUDR, its products are likely to be deprioritized in favor of those from lower-risk suppliers, warned Agroicone managing partner Rodrigo Lima.

“Importers will naturally prefer sourcing from countries with the lowest possible risk to avoid EU fines,” he said. “Even if Brazilian coffee is excellent, buyers may opt for lower-risk suppliers,” he added. Vietnam, for example, is a major coffee supplier classified as low risk.

Marcos Matos, general director of the Brazilian Coffee Exporters Council (Cecafe), said coffee industry representatives traveled to the EU in May after the EUDR risk classification was announced, lobbying for risk to be assessed by region rather than nationally. “We see there is room to educate buyers about Brazilian coffee and the country’s regional diversity,” he said.

In the beef supply chain, competitors like Uruguay have been classified as low risk, while Brazil’s standard risk rating is seen as “unfair” by Caio Penido, president of the Mato Grosso Institute of Beef (Imac), who recently visited Brussels to discuss the issue.

*By Nayara Figueiredo — São Paulo

Source: Valor International

https://valorinternational.globo.com/

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Trump tariffs stall wood pulp price recovery

Prices in top buyer China may have fallen as much as 20% since the mid-April peak

 

06/02/2025

The heightened uncertainty triggered by U.S. President Donald Trump’s new tariffs has led to a slowdown in pulp demand, particularly in the United States and China. The measures also brought a halt to the upward price cycle that had been building since the start of the year.

According to the Foex index from Fastmarkets, the net price of bleached hardwood kraft pulp (BHKP) in China dropped by $77.9 over the past month, with the most recent weekly quote at $517.47 per tonne. Market sources report some resales taking place below $500 per tonne—though those levels have yet to be reflected in official indexes.

If confirmed, these prices would represent a decline of more than 20% from the April peak, amounting to a drop of approximately $120 per tonne.

Suzano—the world’s largest producer of BHKP—had been implementing monthly increases of $20 for Asian markets since the beginning of the year, capitalizing on stronger-than-expected momentum.

According to the company, price adjustments in January, February, and March were implemented successfully. However, instability caused by the new tariffs derailed April negotiations, which failed to move forward. In other words, beyond halting the price rally, the uncertainty-driven downturn effectively wiped out Suzano’s gains from the first quarter.

During a conference call, Leonardo Grimaldi, Suzano’s executive vice president for pulp sales and logistics, said the current price level is “unsustainable” and expressed hope for a normalization of market negotiations in May.

Fastmarkets’ outlook calls for weaker prices in the months ahead, with a possible recovery by year-end. “If global demand for pulp—particularly in China—continues to grow, that could support a price rebound later this year,” said Rafael Barisauskas, Latin America economist at the consultancy.

While the tariffs aren’t the sole cause of the downturn, they have certainly added another layer of complexity.

Since last year, the supply-demand dynamics in the pulp market have been shifting. Some Chinese producers have resumed operations, and new capacity has come online—such as Suzano’s Cerrado Project. The new facility began the year running at full capacity, producing 2.55 million tonnes annually, ahead of the Brazilian company’s own projections.

“Uncertainty about demand in Asia and the U.S. has led buyers to adopt ‘just-in-time’ purchasing strategies, avoiding inventory buildup throughout the supply chain, which has restrained pulp consumption,” Mr. Barisauskas explained.

Data from the Pulp and Paper Products Council (PPPC) for April, cited in a BTG Pactual report, reflect this trend. According to the council, inventory days rose to 44 (47 days for hardwood pulp and 41 for softwood), and the system operating rate stood at 80%, which the bank classified as “underutilized.”

Despite the volatile environment, total pulp shipments rose 2% year-over-year in April, driven by a 15% increase in exports to China. In Latin America, the figure dropped 9%.

After reporting first-quarter results, Suzano CEO Beto Abreu stated that the company had not yet seen changes in demand but remained cautious about market dynamics in the coming months.

In mid-May, during a conversation with reporters, Marcos Assumpção—Suzano’s executive vice president of finance and investor relations—was asked whether the company planned to reduce production to help balance supply and demand.

According to Mr. Assumpção, Suzano has identified operations with higher production costs but does not intend to cut output. “What we’ve said is that we will sell everything we produce,” he affirmed.

One concern for the industry is whether Chinese pulp originally intended for the U.S. might be redirected to other markets. “China will likely face some difficulty exporting short-fiber pulp to the U.S. The big question is whether Chinese buyers will absorb the volume or send it elsewhere,” said Klabin CEO Cristiano Teixeira during a conference call. The company’s outlook for demand in this segment over the coming months is negative.

In the case of softwood pulp (pine), Mr. Teixeira sees a more favorable dynamic, as most of China’s imports in this category come from the U.S. “Any global softwood pulp producer becomes a potential supplier to Chinese buyers, and Brazil could benefit,” he added.

Despite the recent impact, it’s too early to determine whether these shifts signal lasting changes for the industry, said Ambassador José Carlos da Fonseca, president of the Brazilian Paper Packaging Association (Empapel) and international relations director at the Brazilian Tree Industry (Ibá).

Earlier this month, the U.S. and China agreed to lower reciprocal tariffs from 125% to 10% for 90 days while negotiations continue. “Right now, we’re at the peak of this cycle, but the world won’t be the same—even if this passes,” Mr. Fonseca said.

*By Helena Benfica — São Paulo

Source Valor International

https://valorinternational.globo.com/

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