{"id":96067,"date":"2025-10-06T19:04:51","date_gmt":"2025-10-06T22:04:51","guid":{"rendered":"https:\/\/murray.adv.br\/?p=96067"},"modified":"2025-10-06T19:04:51","modified_gmt":"2025-10-06T22:04:51","slug":"tariffs-strong-real-and-rising-costs-slash-exporters-margins","status":"publish","type":"post","link":"https:\/\/murray.adv.br\/en\/tariffs-strong-real-and-rising-costs-slash-exporters-margins\/","title":{"rendered":"Tariffs, strong real and rising costs slash exporters\u2019 margins"},"content":{"rendered":"
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Brazil\u2019s export profitability drops 7.7% in August as 2025 outlook turns negative<\/strong><\/em><\/h6>\n<\/div>\n<\/div>\n
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10\/06\/2025\u00a0<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/section>\n

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A stronger real against the dollar, new U.S. tariffs, falling average export prices, and rising production costs, especially wages and services, dealt a broad blow to Brazilian exporters\u2019 profit margins in August. The hit spanned across industry, extractive sectors, and agribusiness.<\/p>\n<\/div>\n

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Brazil\u2019s overall export profitability dropped 7.7% from August 2024, according to the Foreign Trade Studies Foundation (Funcex). While year-to-date profitability remains slightly positive at 0.9%, it is slowing sharply. In the year through July, the increase stood at 2.2%. Funcex now expects the cumulative margin to flip into negative territory and close 2025 with a 1% loss compared to 2024.<\/p>\n<\/div>\n

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The drop in August was widespread, affecting 24 of the 29 sectors tracked by Funcex.<\/p>\n<\/div>\n

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Daiane Santos, economist at Funcex and professor at the Rio de Janeiro State University (UERJ), said the margin decline reflected a combination of three pressures: a nominal 1.9% appreciation of the real, a 3.3% drop in average export prices, and a 2.7% increase in production costs.<\/p>\n<\/div>\n

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Services and wages were the main contributors to higher production costs, rising 5.2% in August year over year. Domestic inputs rose 1.9%, while imported inputs dropped 2.6%, but not enough to offset the broader cost increases.<\/p>\n<\/div>\n

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The rea\u2019’s appreciation already impacted margins in July, though to a lesser degree. That month, the real rose 0.2% compared to July 2024, contributing to a 4.4% margin drop.<\/p>\n<\/div>\n

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Ms. Santos said the appreciation trend continued in September, likely further squeezing profitability. By the end of September, she projects margins could be flat year to date. From October onward, the cumulative figure is expected to turn negative, ending 2025 down about 1%.<\/p>\n<\/div>\n

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The real\u2019s strength hurts profit margins across all export segments. Sectors with the steepest margin declines in August included fishing and aquaculture; pulp, paper, and paper products; and oil and gas extraction.<\/p>\n<\/div>\n

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Of the 29 segments tracked by Funcex, 15 still posted year-to-date margin gains but saw drops in August compared to a year earlier. These include food products, textiles, wood products, furniture, metallurgy, electrical machinery, and motor vehicles.<\/p>\n<\/div>\n

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Pharmaceuticals and chemicals, computer equipment, and other transportation equipment were among the few with gains both in August and year-to-date. Aircraft, which fall under \u201cother transport equipment,\u201d were exempted from the new tariffs.<\/p>\n<\/div>\n

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Commodities and global trade headwinds<\/strong><\/p>\n<\/div>\n

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The exchange rate isn\u2019t the only factor weighing on margins. Export prices also show no sign of recovering, said Jos\u00e9 Augusto de Castro, head of the Brazilian Foreign Trade Association. \u201cCommodity prices are likely to hold steady or fall a bit further. I see no drivers for an increase right now,\u201d he said.<\/p>\n<\/div>\n

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Mr. Castro expects average prices for soybeans, oil, and iron ore in 2025 to be lower than in 2024. As many commodities are used as inputs for manufactured goods, falling prices also drag down prices for industrial products.<\/p>\n<\/div>\n

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He also pointed to weaker global trade, driven in part by uncertainty surrounding tariff policies under U.S. President Donald Trump.<\/p>\n<\/div>\n

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The World Trade Organization now forecasts global goods trade to grow just 0.9% in 2025, down from the 2.7% previously projected before the recent wave of tariff hikes. In 2024, goods trade grew 2.9%.<\/p>\n<\/div>\n

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Mr. Castro said uncertainty will likely persist, especially around Mr. Trump. He noted that the U.S. president signed a new executive order last week imposing 10% tariffs on wood products and 25% on some types of furniture.<\/p>\n<\/div>\n

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Lower prices<\/strong><\/p>\n<\/div>\n

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Funcex data show that the pace of decline in average export prices accelerated in August, down by 1.5 percentage points compared to July, year over year. Ms. Santos attributed the sharper fall in part to President Trump\u2019s tariffs, which pushed Brazilian exporters to renegotiate prices with U.S. buyers.<\/p>\n<\/div>\n

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The footwear sector was one of the hardest hit, said Priscila Linck, economist and market intelligence coordinator at Abical\u00e7ados, Brazil\u2019s footwear industry association.<\/p>\n<\/div>\n

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From January to August, export profitability for footwear, travel goods, leather, and related products dropped 3.9% compared to the same period in 2024. In August alone, the margin fell 11%, driven by a 6.1% drop in average export prices.<\/p>\n<\/div>\n

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Ms. Linck noted that leather and footwear have different market dynamics, but both are being impacted by international trends and U.S. tariffs. \u201cWhen the real appreciates, companies have less room to offer discounts in dollars without compromising profitability. But sometimes dollar discounts are the only way to maintain volume in international markets,\u201d she said.<\/p>\n<\/div>\n

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She described the current global landscape as uncertain, with intensifying competition\u2014particularly from Asia in key markets for Brazilian footwear. \u201cThere was a significant export loss in August due to the tariffs,\u201d she said.<\/p>\n<\/div>\n

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Footwear shipments to the U.S. fell in August, contributing to a 0.5% drop in Brazil\u2019s overall footwear export volume and a decline in average prices. Footwear sold to the U.S. typically has higher added value, Ms. Linck said.<\/p>\n<\/div>\n

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Even so, some shipments went ahead, absorbing part of the new tariffs. \u201cBrazilian companies maintained some volumes, partly absorbing the tariff. In some cases, the U.S. importers also absorbed part of the cost to preserve long-standing relationships,\u201d she said. However, she warned this is a short-term fix and unsustainable in the long run, underscoring the need to revisit the tariff measures.<\/p>\n<\/div>\n

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Export redirection<\/strong><\/p>\n<\/div>\n

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Ms. Santos said exporters in other sectors also had to cut prices in August to redirect shipments originally bound for the U.S. to other markets. \u201cExporters had to lower prices to ensure their goods were absorbed elsewhere. They lost bargaining power, which pushed prices down,\u201d she said.<\/p>\n<\/div>\n

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A report from the Foreign Trade Indicator (Icomex), published by the Brazilian Institute of Economics at Getulio Vargas Foundation (FGV Ibre), shows that of the 15 main products Brazil exported to the U.S. that were hit by tariffs, nine saw U.S. sales decline in August. Meanwhile, sales to the rest of the world rose or fell less sharply.<\/p>\n<\/div>\n

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For instance, exports of semi-manufactured iron or steel products fell 28.3% to the U.S. but surged 99.7% to other destinations. Boneless frozen beef exports dropped 47.4% to the U.S. but rose 67.9% elsewhere. Coffee exports climbed 16.4% to the U.S., while falling 0.7% to other markets.<\/p>\n<\/div>\n

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Still, the reallocation of exports may be more complex than it appears. Lia Valls, a professor at UERJ and associate researcher at FGV Ibre, said the data do not necessarily mean that Brazilian exporters have found alternative markets.<\/p>\n<\/div>\n

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\u201cSome of these shipments may still be aimed at the U.S. market, even if routed through other countries,\u201d she explained. Some multinational companies are using facilities in other countries to ship to the U.S., replacing direct exports from Brazil. \u201cThere may be a reconfiguration happening that the data aren\u2019t capturing yet,\u201d she said.<\/p>\n

*By\u00a0Marta Watanabe\u00a0\u2014 S\u00e3o Paulo<\/p>\n

Source: Valor International<\/p>\n

https:\/\/valorinternational.globo.com\/<\/p>\n

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Brazil\u2019s export profitability drops 7.7% in August as 2025 outlook turns negative         10\/06\/2025\u00a0 A stronger real against the dollar, new U.S. tariffs, falling average export prices, and rising production costs, especially wages and services, dealt a broad blow to Brazilian exporters\u2019 profit margins in August. 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