TRUMP'S CROWBAR TO OPEN THE BRAZILIAN ECONOMY
U.S. may target Brazil with tariffs over trade barrier gap
Friday, July 11, 2025
The United States may impose tariffs on Brazilian imports that surpass the average rates Brazil applies to U.S. goods, according to BTG Pactual. Brazil's weighted average tariff on U.S. imports is approximately 5.8%, while the U.S. imposes about 1.3% on Brazilian goods. Non-tariff barriers present a larger gap, with 86.4% of products entering Brazil facing restrictions, compared to 77% in the U.S. and 72% globally, as per BTG's analysis using data from the World Integrated Trade Solution (WITS).
BTG Pactual economists Iana Ferrão and Pedro Oliveira state, "Brazilian protectionism stems primarily from the use of non-tariff barriers rather than tariffs." Non-tariff barriers include import quotas, licensing requirements, technical regulations, and complex customs procedures.
Most products imported into Brazil face restrictions such as licensing requirements, sanitary inspections, and technical standards. These barriers act as a "hidden cost" for those selling to Brazil, potentially equivalent to 20% to 40% tariffs, depending on the sector.
The U.S. government has indicated that additional tariffs could consider both direct tariffs and other trade barriers. Ferrão notes, "President Donald Trump himself called for an investigation into tariff and non-tariff barriers."
The economists highlight that by combining tariffs and non-tariff barriers, Brazil ranks high in imposing barriers on U.S. products. This could reinforce perceptions of Brazilian protectionism, possibly justifying retaliatory measures under the "tariff reciprocity" approach.
Future trade negotiations with the U.S. might involve reducing some barriers as a bargaining tool to mitigate impacts on certain sectors and Brazil's trade balance. However, Ferrão and Oliveira suggest a strategic approach, offering concessions in less sensitive sectors to avoid retaliation in critical areas. They note that sectors reliant on basic inputs, such as metallurgy and those related to apparel and machinery, would face pressure if Brazil reduced non-tariff barriers.
Should the U.S. impose a 5.8% average tariff on Brazilian imports, BTG estimates a potential decrease in Brazilian exports to the U.S. by $2 billion in 2025 and $3 billion in 2026.
A 25% tariff could make several Brazilian exports commercially unviable unless prices are lowered. Ferrão and Oliveira acknowledge that a 25% tariff would be an "extreme scenario," with studies suggesting U.S. non-tariff barriers average between 10% and 15% in tariff equivalence.
This scenario could reduce Brazil's trade surplus by R$10 billion in 2025 and R$13 billion in 2026. Ferrão mentions, "The direct impact of U.S. tariffs on Brazil's trade balance and economic activity tends to be limited, given that Brazil is a relatively closed economy. However, the sectoral impacts could be significant."
Source: Datamar News
Publication date: Mon 31 Mar 2025 |
