{"id":94839,"date":"2025-07-11T13:25:20","date_gmt":"2025-07-11T16:25:20","guid":{"rendered":"https:\/\/murray.adv.br\/?p=94839"},"modified":"2025-07-11T13:25:20","modified_gmt":"2025-07-11T16:25:20","slug":"trumps-tariff-threat-seen-as-bigger-risk-for-inflation-than-growth","status":"publish","type":"post","link":"https:\/\/murray.adv.br\/en\/trumps-tariff-threat-seen-as-bigger-risk-for-inflation-than-growth\/","title":{"rendered":"Trump\u2019s tariff threat seen as bigger risk for inflation than growth"},"content":{"rendered":"
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Economists warn of secondary effects from currency, trade tensions<\/em><\/strong><\/h6>\n<\/div>\n<\/div>\n
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07\/11\/2025\u00a0<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/section>\n

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The 50% tariff announced by U.S. President Donald Trump on Brazilian exports is expected to have a limited direct impact on Brazil\u2019s economy, but economists warn that the damage could escalate depending on how negotiations unfold.<\/p>\n<\/div>\n

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Most analysts agree that the effects will be concentrated in specific sectors and companies. As a relatively closed economy, exports make up a modest share of Brazil\u2019s GDP, and the United States, though Brazil\u2019s second-largest buyer, accounts for just 12% of exports.<\/p>\n<\/div>\n

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However, potential secondary effects warrant attention. Currency volatility, especially driven by heightened risk perception, could push up the exchange rate and reignite inflation. Foreign investment could also be affected if tensions with the U.S. escalate<\/p>\n<\/div>\n

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Preliminary estimates from Bradesco BBI suggest the tariffs could cut $15 billion from exports this year, or 0.6% of GDP. BTG Pactual sees losses of $7 billion in 2025 and $13 billion in 2026, equal to 0.3% and 0.6% of GDP, respectively.<\/p>\n<\/div>\n

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In a report, economists Iana Ferr\u00e3o and Luiza Paparounis said the effective average tariff on Brazilian goods exported to the U.S. would jump from 1.3% in 2024 to 37.2% in 2025.<\/p>\n<\/div>\n

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\u201cBecause the price elasticity of Brazil\u2019s imports relative to the exchange rate is below 1 in the short term, an initial depreciation of the real does little to offset the external shock. This means both the trade surplus and current account are likely to deteriorate by roughly the same amount as the drop in exports,\u201d they wrote.<\/p>\n<\/div>\n

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XP Investimentos forecasts a 0.3 percentage point reduction in GDP growth in 2025 and 0.5 pp in 2026 if the tariffs take effect, with a drop in exports of $6.5 billion and $16.5 billion, respectively. The firm also expects tighter financial conditions. Oxford Economics, in contrast, projects a smaller loss\u2014below 0.05 pp in both GDP and exports in 2026\u2014and sees foreign direct investment (FDI) declining by 0.2 pp.<\/p>\n<\/div>\n

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If Brazil enacts reciprocal measures, the impact would be greater. GDP could shrink by 0.1 pp, and FDI could fall as much as 0.5 pp.<\/p>\n<\/div>\n

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\u201cTrump\u2019s letter may open the door to negotiations and reduce the final tariff. But we\u2019re skeptical: Trump\u2019s threat is unlikely to influence domestic Brazilian politics,\u201d said Felipe Camargo, global chief economist at Oxford Economics.<\/p>\n<\/div>\n

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Inflation impact<\/strong><\/p>\n<\/div>\n

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The inflation outlook remains more uncertain. Brazil\u2019s price dynamics had been improving, helped by a stronger real, which had also influenced market expectations. But the exchange rate per U.S. dollar rose 1.79% in two days, halting that trend.<\/p>\n<\/div>\n

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If the exchange rate stabilizes, some economists believe the tariff hike might temporarily ease inflation by boosting domestic supply of products usually shipped to the U.S., such as meat, coffee, and orange juice.<\/p>\n<\/div>\n

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\u201cThere\u2019s talk that beef prices could rise in the second half of the year, but these developments could cancel that out,\u201d said Warren\u2019s inflation strategist, Andr\u00e9a Angelo. In her view, the exchange rate would only start affecting inflation if it reverses the gains of the first half and exceeds R$6 per dollar.<\/p>\n<\/div>\n

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Santander shares a similar view. \u201cWe might see some downward pressure in the first two months. After that, it depends on the dollar\u2019s path. If it stays around current levels, our inflation forecast doesn\u2019t change much,\u201d Adriano Vallad\u00e3o said. A worsening inflation scenario driven by the exchange rate would require the dollar to rise above R$5.80. On Thursday, the commercial rate closed at R$5.54.<\/p>\n<\/div>\n

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XP does not expect a meaningful inflation impact if Brazil refrains from retaliation. But escalation could hit Brazil\u2019s import basket, which includes fuel, chemicals, pharmaceuticals, and auto and aerospace components.<\/p>\n<\/div>\n

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\u201cFor fuels, around 3% of gasoline and 5% of diesel consumed in Brazil come from the U.S. Substitution wouldn\u2019t be easy, but it\u2019s possible. The most critical area, however, is air travel: between 10% and 15% of aviation kerosene used in Brazil is imported from the U.S.,\u201d the firm said. A 50% Brazilian tariff on these goods could add 0.05 pp to inflation through higher airfare.<\/p>\n<\/div>\n

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No retreat expected from Trump<\/strong><\/p>\n<\/div>\n

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For UBS BB chief economist, Alexandre de \u00c1zara, the 50% tariff on Brazilian products is unlikely to be rolled back. He argued that Mr. Trump\u2019s grievances clash directly with the Brazilian government and judiciary:\u00a0the legal situation of former president Jair Bolsonaro<\/a>, Mr. Lula\u2019s pro-Iran rhetoric and support for\u00a0a BRICS currency alternative to the dollar,<\/a>\u00a0and what the American president sees as persecution of U.S. tech companies by Brazil\u2019s Supreme Court.<\/p>\n<\/div>\n

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\u201cThe Brazilian government needs to stop escalating first. What we\u2019ve seen so far is that if a country retaliates, Trump always retaliates back,\u201d Mr. \u00c1zara said. He does not believe Mr. Trump will compromise on these issues.<\/p>\n<\/div>\n

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The greater risk, he warned, lies in further escalation. \u201cFrom an economic standpoint, de-escalation would be wiser. But that doesn\u2019t seem to be the government\u2019s path. If Brazil imposes a 50% tariff across the board, we might stop producing medicine, for instance, because a large share of the pharmaceutical industry\u2019s inputs come from the U.S. And Trump could strike back again.\u201d<\/p>\n<\/div>\n

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Mr. \u00c1zara does not rule out more drastic U.S. measures, such as restrictions on American investment in Brazil. \u201cThat could be very damaging and could severely impact the exchange rate,\u201d he said.<\/p>\n

*By\u00a0Marcelo Osakabe\u00a0and\u00a0Marcela Villar\u00a0\u2014 S\u00e3o Paulo<\/p>\n

Souce: Valor International<\/p>\n

https:\/\/valorinternational.globo.com\/<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/article>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Economists warn of secondary effects from currency, trade tensions 07\/11\/2025\u00a0 The 50% tariff announced by U.S. President Donald Trump on Brazilian exports is expected to have a limited direct impact on Brazil\u2019s economy, but economists warn that the damage could escalate depending on how negotiations unfold. 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