U.S. tariff hike hits 10,800 mid-sized exporters in Brazil

Professor Paulo Roberto Feldmann of the University of São Paulo’s School of Economics, Business Administration, Accounting and Actuarial Science (FEA-USP) sees three distinct scenarios among the sectors most vulnerable to the tariff shock. In agribusiness export chains—such as coffee, cocoa, meat, and fish—large, efficient groups can redirect shipments to Asia or Europe and, if needed, shift part of their output to the domestic market, helping stabilize prices. However, in sectors like textiles and furniture, which are dominated by mid-sized firms lacking scale or export consortia, the tariffs leave them cornered, with increasing risks of layoffs and revenue losses.

Machinery falls somewhere in between, according to Mr. Feldmann. Manufacturers of agricultural equipment benefit from strong domestic demand and advanced technology, while producers of industrial machinery are losing ground in a shrinking manufacturing base. Mr. Feldmann warns that without cost-cutting, regulatory streamlining, and support for export consortia, the tariff hike could accelerate Brazil’s deindustrialization and deter investment.

FDC professor Eduardo Menicucci modeled the impact of the tariff hike using a real case from Pará: an açaí producer that earns a third of its revenue from U.S. sales. “The increase in the final price for American consumers would be 36%, and that can’t be fully passed on by the importer,” he pointed out. “This creates a very narrow margin for maneuvering, especially with limited domestic demand and no capacity to store the entire output in cold storage.”

Some sectors may be able to build inventory, Mr. Menicucci noted, while others—like furniture—will likely be forced to shut down production lines for the export market. Nearly one-third of Brazil’s furniture and mattress exports and 40% of exports of furniture-related raw materials, inputs, and technology go to U.S. consumers, according to the Brazilian Furniture Industry Association (ABIMOVEL). Some companies are already seeing order cancellations, shipment suspensions, production cuts, and revenue losses tied directly to the Trump administration’s tariff hike.

One example is Móveis Serraltense, a furniture company based in São Bento do Sul, which granted two weeks of collective leave to its 140 employees in July. In 2024, 80% of the company’s production went to the United States; in the first half of 2025, that figure dropped to just 30%. “For the next three months, we’re projecting production idle time of 40% to 50%,” says CEO Daniel Lutz.

“We plan to retain all jobs, perhaps by reducing the workweek by one day without cutting wages, to save on electricity and inputs,” Mr. Lutz added. Serraltense is exploring new markets in Europe and Latin America, but the CEO warns that diversification will take time.

In the furniture hub of Arapongas, Paraná, leather upholstery manufacturers are also feeling the pressure. At Toro Bianco, a family-run business with 100 employees, scheduled shipments for August were canceled, said director Marcela Carandina.

In Nova Prata, Rio Grande do Sul, nearly all of Artemobili’s production is exported to the U.S. Due to a wave of order cancellations, the company put its 360 employees on paid furloughs. “This doesn’t just create uncertainty for our company, but for the entire community, where hundreds of families rely on the furniture sector to make a living,” said CEO Gabriel João Cherubini.

The Santa Catarina furniture cluster—the country’s largest exporter of furniture—is heavily dependent on U.S. clients. Its 398 companies, located in São Bento do Sul, Campo Alegre, and Rio Negrinho, employ around 7,000 people and generated $123.4 million in exports last year, representing 14% of Brazil’s total furniture exports. The U.S. accounted for 62% of that total ($77.1 million).

“The new tariffs erode the competitiveness of Brazilian furniture, undermining a bilateral trade relationship that our companies have built through efficiency, innovation, and sustainability,” said Luiz Carlos Pimentel, president of the São Bento do Sul Furniture Industry Association (Sindusmobil). He calls for the continuation and strengthening of bilateral trade negotiations and stresses the urgent need for measures to support Brazil’s export-oriented industries.

The tariff hike comes at a fragile time for mid-sized firms, as highlighted by early findings from FDC’s annual Market Radar study, shared in advance with Valor. Between 2021 and 2024, the number of mid-sized companies entering court-supervised reorganization more than doubled, from 197 to 416. The study, based on data from 10,400 mid-sized companies, shows that these firms saw a 10% drop in net income in 2024 compared to 2022.

“If the tariffs are not eased, some of these companies will be in very precarious situations, especially those that are already in debt,” Mr. Menicucci said. “For those that are already putting workers on paid furloughs, the next step will likely be layoffs, and I don’t know of any mid-sized firm with the financial reserves to handle that.”

Structural issues like lack of planning and limited access to capital continue to hamper mid-sized businesses in Brazil’s still-low-internationalization economy. An FDC study conducted in 2023 found that only 11% of mid-sized companies had management maturity levels considered excellent. “That points to a major gap, but also a huge opportunity,” said professor and researcher Diego Marconatto. He noted that just 13% of Brazil’s mid-sized companies have subsidiaries abroad, even though 85% operate under a B2B model.