Dr. Sodfa Mohamed Mahmoud‏‏

The United States recently <a href="https://ustr.gov/node/14362" rel="noopener noreferrer" target="_blank">announced</a> a 25 percent tariff on selected Brazilian imports, which took effect on July 22, 2026, following a year-long investigation that concluded Brazil had engaged in "unfair" trade practices. Brazil is among the <a href="https://www.bbc.com/portuguese/articles/c5y4lq18eqgo" rel="noopener noreferrer" target="_blank">first</a> countries to face new tariffs under Section 301 of the Trade Act of 1974 since the U.S. Supreme Court issued a ruling in February 2026 that struck down a set of tariffs previously imposed by the administration of President Donald Trump under a different legal basis.On July 23, 2026, the United States announced an additional 12.5 percent tariff on Brazilian exports, accusing the country of failing to do enough to <a href="https://www.bbc.com/portuguese/articles/c78ge75w3zwo" rel="noopener noreferrer" target="_blank">combat</a> forced labor. The measure raises the total tariff burden on some Brazilian products to as much as 37.5 percent.Contentious IssuesThe U.S. investigation, launched in <a href="https://www.reuters.com/world/americas/us-launches-probe-into-brazils-trade-practices-digital-payment-services-2025-07-16/" rel="noopener noreferrer" target="_blank">July</a> 2025, concluded that Brazilian <a href="https://g1.globo.com/mundo/noticia/2026/07/16/latino-americano-frustrado-passa-pano-para-maduro-relembre-as-trocas-de-farpas-entre-lula-e-marco-rubio.ghtml" rel="noopener noreferrer" target="_blank">policies</a> had harmed the interests of American companies and exporters across <a href="https://edition.cnn.com/2026/07/16/business/us-brazil-tariffs-trade-intl-hnk" rel="noopener noreferrer" target="_blank">several areas</a>, including digital trade and access to Brazil’s ethanol market. Brazilian President Luiz Inácio Lula da Silva, however, argued that there was no justification for what he described as "illegal and arbitrary" tariffs.The dispute reflects sharply different interpretations of Washington’s underlying motives. The most contentious issues include the following:1. The Dispute Over Regulation of Social Media Platforms: The Trump administration criticized rulings by Brazilian <a href="https://g1.globo.com/mundo/noticia/2026/07/16/latino-americano-frustrado-passa-pano-para-maduro-relembre-as-trocas-de-farpas-entre-lula-e-marco-rubio.ghtml" rel="noopener noreferrer" target="_blank">courts</a> that required U.S. technology companies to remove political content from platforms including X, Google, and Meta. These rulings also included the suspension of accounts belonging to U.S. residents, the imposition of substantial fines for noncompliance with court orders, and restrictions on access to assets, accounts, and payment-processing systems in Brazil.Brazilian courts, by contrast, argue that these measures are <a href="https://restofworld.org/2025/brazil-social-media-content-ruling/" rel="noopener noreferrer" target="_blank">intended</a> to protect society from disinformation and false news, while combating hate speech, racism, and incitement to violence.2. Washington’s Dispute with Brazil Over Digital Payments: The United States argues that Brazil has unfairly disadvantaged American <a href="https://www.reuters.com/business/finance/brazil-us-clash-over-future-payments-popular-pix-system-stirs-global-interest-2026-07-21/" rel="noopener noreferrer" target="_blank">credit-card</a> companies operating in digital commerce and electronic-payment services by adopting policies that favor Pix, the instant-payment system operated by the Central Bank of Brazil and one of the most successful platforms of its kind in the world.Brazil’s Ministry of Foreign Affairs has rejected this claim, arguing that the central bank administers the instant payment system in a neutral manner and does not discriminate against <a href="https://www.sandmark.com/news/features/us-tariffs-target-brazils-pix-raising-stakes-card-networks" rel="noopener noreferrer" target="_blank">foreign companies</a>. President Lula <a href="https://americanbazaaronline.com/2026/07/21/brazils-payment-app-draws-us-scrutiny-as-trump-imposes-tariffs-484946/" rel="noopener noreferrer" target="_blank">defended</a> the platform, stating: "No one will change our Pix. It is public, free, and will remain so."Pix currently accounts for more than half of all transactions in Brazil and has <a href="https://www.reuters.com/business/finance/brazil-us-clash-over-future-payments-popular-pix-system-stirs-global-interest-2026-07-21/" rel="noopener noreferrer" target="_blank">approximately</a> 170 million users. By enabling instant transfers between bank accounts through banking applications, offering free person-to-person transfers, reducing costs, and substantially accelerating business transactions, the system has helped expand financial inclusion across Brazil.Some <a href="https://www.bbc.com/portuguese/articles/clyvgvw7px7o" rel="noopener noreferrer" target="_blank">economists</a> believe the Trump administration is concerned that Pix and similar payment systems could eventually challenge the dollar’s international dominance.3. The Dispute Over Brazilian Support for Ethanol: The new U.S. tariffs target several Brazilian products, including ethanol, a fuel produced primarily from sugarcane. Washington says the measures are intended to address what it considers unfair Brazilian trade barriers against U.S. ethanol, which is produced mainly from corn.The Trump administration argues that Brazil’s 18 percent tariff on American ethanol <a href="https://ustr.gov/node/14362" rel="noopener noreferrer" target="_blank">caused</a> U.S. exports to Brazil to fall by 87%, declining to $96 million in 2025, compared with $761 million in 2018.Brazilian officials, however, have criticized Washington’s demand for greater access to Brazil’s ethanol market without offering reciprocal concessions on Brazilian sugar imports, which remain subject to U.S. tariffs and restrictions.4. Illegal Deforestation in the Amazon: The Office of the U.S. Trade Representative (USTR) stated that Brazil had failed to enforce its legal framework against deforestation effectively, thereby undermining the competitiveness of the U.S. <a href="https://g1.globo.com/mundo/noticia/2026/07/16/latino-americano-frustrado-passa-pano-para-maduro-relembre-as-trocas-de-farpas-entre-lula-e-marco-rubio.ghtml" rel="noopener noreferrer" target="_blank">timber industry</a>.The Brazilian government, however, maintains that its policies contributed to reducing deforestation in 2025 to its lowest level in a decade. In May 2026, <a href="https://fortune.com/2026/06/12/brazil-amazon-deforestation-record-trump-tariffs-rebuttal/" rel="noopener noreferrer" target="_blank">deforestation</a> in the Amazon was reportedly 61.4 % lower than during the same month in 2025.5. Accusations of Unfair and Preferential Tariff Treatment: According to the USTR, Brazil grants <a href="https://ustr.gov/node/14362" rel="noopener noreferrer" target="_blank">preferential</a> trade treatment to Mexico and India across hundreds of products, applying lower tariffs than those faced by U.S. exporters in the same sectors. Washington argues that this unfairly harms American workers and producers.Brazil’s government counters that U.S. demands for preferential treatment are <a href="https://www.bbc.com/portuguese/articles/c5y4lq18eqgo" rel="noopener noreferrer" target="_blank">incompatible</a> with its obligations under existing trade agreements and its membership in <a href="https://www.piie.com/blogs/realtime-economics/2026/trumps-new-tariffs-brazil-reflect-weakness-us-trade-strategy" rel="noopener noreferrer" target="_blank">Mercosur</a>, the South American trade bloc. Brasília also maintains that its preferential tariffs for Mexico and India comply with World Trade Organization (WTO) rules permitting tariff preferences among developing countries since 1979.6. Intellectual Property Protection and Corruption: Brazil has remained on the USTR’s Special 301 <a href="https://g1.globo.com/mundo/noticia/2026/07/16/latino-americano-frustrado-passa-pano-para-maduro-relembre-as-trocas-de-farpas-entre-lula-e-marco-rubio.ghtml" rel="noopener noreferrer" target="_blank">Watch List</a> since 2007. The annual report identifies countries whose protection of patents, trademarks, and copyrights the USTR considers inadequate or ineffective. Brazil’s inclusion means that the United States believes the country does not provide American rights holders with adequate and effective intellectual property protection.At the same time, Washington argues that <a href="https://ustr.gov/node/14362" rel="noopener noreferrer" target="_blank">corruption</a> in Brazil imposes additional costs and burdens on U.S. companies.Potential ImplicationsThe new U.S. tariffs on Brazil could trigger a range of economic and political consequences, including the following:1. A Decline in Bilateral Trade: The United States is Brazil’s <a href="https://www.bloomberg.com/news/articles/2026-07-16/us-25-tariffs-on-brazil-risk-becoming-an-election-gift-to-lula" rel="noopener noreferrer" target="_blank">second</a>-largest trading partner after China. In 2025, Brazil imported $88.4 billion in goods from the U.S., and exported $46.6 billion to the U.S., resulting in a $41.8 billion U.S. trade <a href="https://usafacts.org/answers/what-is-the-value-of-us-trade/countries/brazil/" rel="noopener noreferrer" target="_blank">surplus</a> with Brazil.Based on bilateral trade figures for 2024, Brazil’s Ministry of Development, Industry, Trade and Services <a href="https://www.bbc.com/portuguese/articles/cd9wqw9n4peo" rel="noopener noreferrer" target="_blank">estimated</a> that approximately 23.1 percent of Brazilian exports to the United States would be subject to the new additional tariffs. Around <a href="https://valorinternational.globo.com/economy/news/2026/07/24/us-tariffs-affect-125bn-in-annual-exports-from-brazil-amcham-says.ghtml" rel="noopener noreferrer" target="_blank">3,000</a> Brazilian products are expected to be affected.<a href="https://thearabianpost.com/us-tariff-blow-reshapes-brazil-trade-ties/" rel="noopener noreferrer" target="_blank">Sectors</a> whose products will face additional tariffs on top of existing duties include footwear, agricultural machinery, textiles, wood products, non-pharmaceutical chemicals, and ethanol. This places Brazil among the countries facing the highest tariff levels imposed by Washington on any trading partner.The measures are therefore likely to further undermine the competitiveness of Brazilian exports in the U.S. market and exacerbate the ongoing <a href="https://valorinternational.globo.com/economy/news/2026/07/24/us-tariffs-affect-125bn-in-annual-exports-from-brazil-amcham-says.ghtml" rel="noopener noreferrer" target="_blank">decline</a> in bilateral trade.2. Corporate Pressure on Washington to Limit the Impact of the Tariffs: Under pressure from U.S. industry groups, Washington <a href="https://www.yahoo.com/news/politics/articles/us-tariffs-brazil-aren-t-161220937.html" rel="noopener noreferrer" target="_blank">exempted</a> several Brazilian products from the tariffs, including coffee, beef, avocados, orange juice, aircraft parts, and petroleum oils.These exemptions have limited the immediate negative impact on some of Brazil’s largest exporters while reducing the risk of sharp price increases for American households.The tariffs may therefore have only a limited effect on the broader Brazilian economy, not only because of the exemptions but also because Brazil has already begun <a href="https://www.gzeromedia.com/news/analysis/the-new-us-tariffs-on-brazil-arent-about-brazil" rel="noopener noreferrer" target="_blank">reducing</a> its dependence on the U.S. market. During the first half of 2026, Brazilian exports to the United States fell to their lowest share on record, accounting for less than 10 percent of the country’s total exports.3. A Spike in U.S.-Brazil Tensions: The new tariffs are likely to intensify disagreements between Washington and Brasília. U.S. Secretary of State Marco Rubio criticized the Brazilian government on X, stating in response to the tariffs: "President Lula and his government did not negotiate with the United States in good faith."These remarks reinforce the argument advanced by members of the Brazilian government that the decision is politically motivated. The USTR, however, has <a href="https://g1.globo.com/mundo/noticia/2026/07/16/latino-americano-frustrado-passa-pano-para-maduro-relembre-as-trocas-de-farpas-entre-lula-e-marco-rubio.ghtml" rel="noopener noreferrer" target="_blank">denied</a> that the tariffs stem from political disagreements with Lula’s government.4. Intensifying Political Polarization in Brazil: The U.S. tariffs have triggered significant political controversy inside Brazil. Senator Flávio Bolsonaro, the son of the former president and Lula da Silva’s principal rival in the forthcoming October election, <a href="https://www.reuters.com/world/americas/us-tariffs-shake-up-brazils-presidential-race-candidates-trade-blame-2026-07-16/" rel="noopener noreferrer" target="_blank">blamed</a> Lula for the tariff increases.Lula, in turn, argued that the tariffs were "part of a scheme prepared with the active cooperation of the Bolsonaro family. They are false patriots who planned and publicly defended measures targeting our country for electoral reasons."Flávio Bolsonaro, who <a href="https://www.cnnbrasil.com.br/politica/flavio-bolsonaro-embarca-para-os-eua-para-audiencia-sobre-novo-tarifaco/" rel="noopener noreferrer" target="_blank">visited</a> Trump at the White House days before the tariffs were proposed, denied the accusations. He also urged the U.S. administration not to impose new tariffs before the election, arguing that doing so would benefit Lula politically.Brazil’s political right, supported by the Federation of Industries of the State of São Paulo (<a href="https://www.gazetadopovo.com.br/economia/fiesp-culpa-lula-por-tarifaco-e-coordenador-de-campanha-de-lula-reage-vergonhoso/" rel="noopener noreferrer" target="_blank">FIESP</a>), has blamed Lula and claimed that his government’s failure to prevent the tariffs was a sign of incompetence. It has also held his administration responsible for the deterioration in relations with the United States.This may explain the Brazilian government’s preference not to adopt immediate retaliatory measures, even though the country’s Congress has already approved a reciprocity law. Retaliation could <a href="https://www.bbc.com/portuguese/articles/c5y4lq18eqgo" rel="noopener noreferrer" target="_blank">trigger</a> a trade war with the United States, with serious consequences for Brazil.5. Potentially Strengthening Lula’s Electoral Prospects: The tariffs may improve Lula’s prospects in the next presidential election, particularly as he seeks to make national <a href="https://valorinternational.globo.com/economy/news/2026/07/23/lula-says-tariff-dispute-will-not-derail-talks-with-us.ghtml" rel="noopener noreferrer" target="_blank">sovereignty</a> a central theme of his campaign.His allies believe the new measures reinforce the government’s image as a defender of Brazil’s sovereignty and national interests, while portraying the opposition—especially the family of former President Jair Bolsonaro—as aligned with foreign powers.Nevertheless, Lula continues to face several <a href="https://www.americasquarterly.org/article/why-lula-is-struggling/" rel="noopener noreferrer" target="_blank">political challenges</a>, including his age (he is currently 80 years old) and the perception that his stance on crime is too weak.6. Strengthening Brazil’s External Trade Partnerships and Protecting Domestic Industry: In response to the tariffs, Lula emphasized that Brazil remains committed to negotiations with the United States while continuing to search for <a href="https://valorinternational.globo.com/economy/news/2026/07/23/lula-says-tariff-dispute-will-not-derail-talks-with-us.ghtml" rel="noopener noreferrer" target="_blank">alternative markets</a> that could strengthen the country’s position following the dispute.Brazil is already <a href="https://www.bbc.com/portuguese/articles/c5y4lq18eqgo" rel="noopener noreferrer" target="_blank">negotiating</a> with several countries, including Canada and a number of Asian states. A trade agreement between the European Union and Mercosur is also moving toward implementation.In a related development, <a href="https://www.scmp.com/news/china/diplomacy/article/3361648/china-vows-defend-brazils-sovereignty-trumps-25-tariff-bites" rel="noopener noreferrer" target="_blank">China</a>, Brazil’s largest trading partner, pledged to defend the country’s sovereignty and development interests after Washington imposed the new tariffs.ConclusionThe new U.S. tariffs on Brazil are likely to reshape relations between the two countries and could play an important role in influencing Brazil’s political and electoral landscape.For now, Brasília has chosen to proceed cautiously, avoiding immediate retaliation while submitting a formal request for consultations with Washington under the WTO dispute-settlement mechanism and providing support to affected exporters.Nevertheless, the measures have highlighted Washington’s growing willingness to use trade policy as a tool for intervening in the domestic affairs of other countries. With Brazil’s presidential election approaching, political tensions between Washington and Brasília are likely to intensify.

What Are the Implications of Washington’s New Tariffs on Brazil?