Wait for the Law of the Unintended consequences to hit.
Trade war has already shown that. When the US hit China, Brazil benefitted. Brazil has been profiting from the US-China trade war.
This might have not gone down well in DC
Third-country spillovers from the US-China trade war
The 2018-2019 US-China trade war represented a major escalation in commercial tensions between the world’s two largest economies. The US imposed steep tariffs on a wide range of Chinese goods, and China responded with its own tariffs on US exports. Although the measures were aimed at each other, their effects spilled over internationally. Countries not directly involved, especially those with similar export profiles, faced a reshaped global trading environment, with new risks, but also opportunities.
Brazil was one such country. The country has strong trade ties to both China and the US. In 2017, China accounted for 22% of Brazil’s exports and the US for 12%. However, the composition of Brazil’s exports was asymmetrically correlated with those of the two trade war participants: it aligned far more closely with the US than with China. In particular, Brazil’s exports were highly correlated with US exports to China (53.5%), but showed almost no correlation with Chinese exports to the US (1.3%).
This asymmetry in export patterns created the conditions for trade diversion (Fajgelbaum et al. 2024). As China imposed high tariffs on American products, it began turning to alternative suppliers, including Brazil.
Using detailed product-level export data from Brazil to both China and the US between 2017 and 2021, we exploit variation in the timing of tariff impositions to implement a staggered difference-in-differences approach, following the methodology developed by Callaway and Sant’Anna (2021). This allows us to examine the product-level impact of the discriminatory tariffs imposed by China and the US. The results, displayed in Figure 1, are striking: Brazil’s exports of goods targeted by China’s retaliatory tariffs increased within a few months of the tariff implementation, whereas exports to the US showed no significant response.
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