However, experts warn that U.S. trade measures could slow global growth, strengthen the dollar, and add pressure on Brazil’s economy
03/05/2025
The tariffs imposed by Donald Trump on China, Canada, and Mexico—along with the retaliatory measures from these countries—could impact Brazil’s trade flows, but not immediately, economists say. Their main concern is the broader consequences of the tariff war, including high inflation paired with weak economic activity in the United States, elevated U.S. interest rates, and a stronger dollar globally. These factors come at a time when Brazil’s Central Bank is also working to control inflation domestically.
“The aggressive set of tariff increases in the U.S. could push the American economy toward potential stagflation,” said Sergio Vale, chief economist at MB Associados. This impact, he noted, is likely to be felt worldwide. If, in addition to Mr. Trump’s “tariff offensive,” other countries retaliate, U.S. GDP could decline by more than one percentage point, according to Mr. Vale. “Trump could still reverse his policy, but signs suggest he will double down on the same mistakes from his first term. The result will be slower global growth or even a recession,” he said.
For Brazil, he continued, the situation is even more challenging due to the negative impact of currency depreciation. Economic activity was already expected to slow this year due to high interest rates. “The U.S. measures only worsen this scenario, dragging us into a more adverse situation, with potential stagflation here as well,” Mr. Vale said.
Mr. Trump’s tariff dispute is escalating rapidly, noted Nicola Tingas, chief economist at the National Association of Credit, Financing, and Investment Institutions (ACREFI), pointing to responses from Canadian authorities as an example.
“In terms of trade flows to Brazil, the immediate impact is not significant, as it will depend on how the trade war evolves in the coming months and how each country adjusts. The real effects will be felt by economies directly involved in the dispute with Trump. Countries like Brazil, which maintain a certain balance in their relations with the U.S., could face consequences, but over a longer timeframe,” Mr. Tingas said.
However, Brazil is “fully exposed to U.S. interest rates and the strength of the dollar,” he noted. “The situation is complex, as market forces are pulling in different directions. The best approach for Brazil is to focus on strengthening its domestic economy to be better positioned in case of a more negative global outlook.”
The Brazilian government has responded with caution, awaiting a conversation between Vice President and Minister of Development, Industry, Trade, and Services Geraldo Alckmin and U.S. Commerce Secretary Howard Lutnick. The phone call was scheduled for Friday (28) but did not take place and remains unscheduled. However, Valor has learned that it is more likely to happen next week.
Brazilian exporters are also closely monitoring an executive order signed by the U.S. on Saturday to launch an investigation that could lead to higher tariffs on wood products, including lumber and derivatives such as furniture. The justification for the measure, as with the universal tariffs imposed on steel and aluminum, is national security, noted Livio Ribeiro, a partner at BRCG and a researcher at the Brazilian Institute of Economics (FGV Ibre). “The argument is that there is ample domestic supply and that imports are taking up market share.”
Although these items are not among Brazil’s top ten exports, the U.S., along with Europe, is one of the main markets for the country’s furniture and wood industry. Any new trade barriers could have substantial implications, said Welber Barral, former Brazilian foreign trade secretary and lawyer at BPP Advogados. “This could lead to additional tariffs or quotas,” he said. “Depending on the investigation’s outcome, tariffs could hinder the competitiveness of Brazilian products in the U.S. market.”
The investigation could take up to 270 days to conclude. “Given Trump’s increasingly aggressive stance, it is likely that tariffs will be raised,” Mr. Vale said, adding that “finding alternative buyers won’t be simple” with both the global and Brazilian economies slowing down.
(Lu Aiko and Fabio Murakawa in Brasília contributed reporting.)
*By Rafael Vazquez e Anaïs Fernandes — São Paulo
Source: Valor International