Hi Carranza What we are seeing is US and Brazil repositioning in the new geopolitical landscape.
As the US is repositions in the new geopolitical landscape, critical minerals came to the fore. The US has the technology and capital resources. not only to diversify its sources, but create critical minerals independence.
It has done it before. The US became the top oil exporter and is positioning the Western Hemisphere -Guyana, Brazil and now Argentina's Vaca Muerta- to jointly pull their weight against the other major producers.
My view is that the US plans to do the same with the whole menu of critical minerals what it did with oil. Latin America holds nearly 60% of the world's lithium resources and has significant reserves of other critical minerals like copper, iron ore, and rare earth elements. Japan, the EU and South Korea will, gladly, join the Western Hemisphere critical minerals bandwagon
US and Brazil edge toward tariff truce as both economies feel the heat
Source: AL Circle Oct 09, 2025 10:15
Aluminum Global Industry
The White House and Planalto Palace are inching toward detente after months of trade friction that has left industries on both sides bruised. A half-hour video call this week between US President Donald Trump and Brazilian President Luiz Inacio Lula da Silva opened the first door toward thawing relations since Washington hit tariffs on Brazilian imports this summer.In Monday's call, which has been described by both sides as "friendly and positive", Lula persuaded Trump to roll back the 50 per cent tariff on Brazilian goods, calling for a return to the original 10 per cent level and the lifting of sanctions on certain Brazilian officials. "It was mostly focused on the economy and trade, between our two countries," Trump posted later on Truth Social, adding that they would "get together in the not-too-distant future, both in Brazil and the United States."
The conversation marked a striking change in tone after months of animosity. Relations froze when Trump raised tariffs in July, citing "developments concerning Brazil," including the trial of former president Jair Bolsonaro, who was convicted of plotting a coup. Lula, in response, had accused Trump of "foreign interference" and behaving like an "emperor." But Monday's exchange suggested both leaders are looking for a path out of confrontation.
Brazil's Vice-President Geraldo Alckmin described the call as "better than expected," noting optimism for future talks. Lula has invited Trump to attend next month's UN Climate Summit in Belém and proposed meetings at the ASEAN Summit in Malaysia or during a future visit to Washington.
A tariff war that cut deep
At the heart of the conflict lies Executive Order 14323, signed by Trump on July 30, declaring a national emergency and slapping a 40 per cent tariff on most Brazil-origin imports, effective August 6. The move, followed by EO 14326 the next day, added a separate 10 per cent reciprocal tariff - bringing the cumulative rate to 50 per cent on most Brazilian goods entering the United States.
While the White House justified the measure under the International Emergency Economic Powers Act (IEEPA), it landed as a heavy blow to Brazil's export-driven economy. Only a handful of products - orange juice, civil aircraft and parts, machinery, metals, and energy - escaped the blanket duty. But even those sectors are now bracing for secondary effects.
For instance, Embraer, Brazil's flagship aircraft manufacturer, warned that the new tariffs could cost the company dearly. The United States represents 45 per cent of Embraer's commercial jet exports and a staggering 70 per cent of its executive jet sales. The company estimates each aircraft could become roughly USD 9 million more expensive for US buyers, leading to delivery delays and cancellations. Embraer's management forecasts a 53 per cent drop in free cash flow and an 89 per cent rise in capital expenditures, forcing dividend cuts of about 36 per cent for fiscal year 2025 - a blow reminiscent of the pandemic slump, when revenues sank 30 per cent.
Similarly, WEG, a global leader in electric motors and renewable energy equipment, faces a rougher path. The company, which already reported softer Q2 results amid geopolitical headwinds, expects the tariff to further strain its operations. "To counterbalance the negative effects," management plans to reroute exports through Mexico and India to indirectly serve US demand. But the manoeuvre comes at a cost: projections show a 24 per cent fall in free cash flow and a 3.5 per cent rise in net debt, forcing a dividend reduction to 0.06 Brazilian real per share - down 36.2 per cent quarter-over-quarter and 14.3 per cent year-over-year.
Washington's case against Brazil
Behind the tariff firestorm is a broader dispute over Brazil's trade and governance practices. On July 18, the Office of the US Trade Representative launched a Section 301 investigation into alleged discriminatory practices by Brazil, focusing on six issues: barriers in digital trade and payments, preferential tariffs to India and Mexico, weak anti-corruption enforcement, poor IP protections, limited access for US ethanol, and inadequate action against illegal deforestation - which Washington claims gives Brazilian agribusiness an unfair advantage.
Public hearings and comments on the investigation are ongoing, with submissions due in mid-August and testimony scheduled for early September. Depending on findings, further trade actions could follow, deepening tensions if not resolved diplomatically.
Compounding the dispute, the Trump administration sanctioned Brazilian Supreme Court Justice Alexandre de Moraes - who oversaw Bolsonaro's trial - under the Global Magnitsky Act, citing "abusive judicial overreach" and "politicised prosecutions." Secretary of State Marco Rubio revoked visas for Moraes and his family, escalating a judicial-political spat that spilled into trade diplomacy.
A source close to Lula told the BBC that Rubio's appointment as Washington's lead negotiator on the tariff issue is "being reviewed," suggesting Brasília prefers "a negotiator directly connected to the president." Another insider, speaking anonymously, was blunter: Lula's government "would have preferred a different interlocutor to Rubio."
Aluminum: Mixed reactions and market ripples
The impact of the US tariff rippled through Brazil's aluminum value chain - though not uniformly. The country's primary producers, cushioned by a strong domestic market, have weathered the shock better than its downstream industries.
"CBA has more than 90 per cent of its sales volume directed to the domestic market, which minimises the consequences of the trade measures adopted by the US," a Companhia Brasileira de Alumínio spokesperson told Fastmarkets on August 22.
"Albras has not seen a significant change in export flows from Brazil following the implementation of the 50 per cent tariffs by the US," an Albras spokesperson said on August 25. "Brazilian producers, including Albras, continue to supply the domestic market."
Alumar, too, remains unruffled. "Alumar's production is directed to the Brazilian domestic market, considered strategic and growing, so our priority remains to consistently and responsibly meet domestic demand," its spokesperson told Fastmarkets on August 26. The company confirmed its Maranhão smelter is "operating close to its full capacity and on a progressive path to reach 100 per cent."
However, premiums tell another story. Fastmarkets data shows the aluminum P1020A premium, high-VAT market (São Paulo region), dropped to USD 110-130 per tonne by August 19, down from USD 130-170 in March. The low-VAT market saw similar declines, from USD 240–290 to USD 215–250 per tonne. A new domestic billet premium launched on August 26 was assessed at USD 470–530 per tonne.
Alongside, Brazil's aluminium export to the US fell by 25 per cent Y-o-Y. While from January to July 2024 Brazil exported approximately 31193 tonnes of aluminum to the US, the volume dropped to approximately 27,900 tonnes during the same period in 2025.
Collateral damage: Rare earths and strategic materials
Beyond aluminum, the tariffs have had unintended consequences on Brazil's emerging rare earth industry. As one of the few non-Chinese sources of rare earth elements used in EV and drone motors, Brazil was positioning itself as a strategic partner for the US in diversifying critical mineral supply. The 50 per cent tariff, however, has made Brazilian rare earths prohibitively expensive for American buyers, undermining the very diversification Washington has been advocating.
"The US wanted to move away from dependence on China," one Brazilian trade analyst said. "Now, by penalising Brazil, they've made that alternative unviable."
A test of economic realpolitik
For both economies, the tariffs are proving costly. The US risks pushing its manufacturers toward higher input prices and supply bottlenecks, while Brazil faces capital flight and declining export orders. The tariffs, initially framed as a power play in Trump's renewed push for "reciprocal fairness," have instead exposed how interlinked the two economies have become.
Lula, acutely aware of the domestic political optics, has framed his engagement with Trump as an attempt to "restore friendly relations between the two largest Western democracies." Both leaders now appear keen to turn down the temperature before mutual economic pain intensifies.
As negotiations continue - with Marco Rubio leading talks for Washington and Geraldo Alckmin steering them from Brasília - what happens next will determine not just tariff rates, but the direction of US–Brazil relations in a geopolitically recalibrating world.
The call between Trump and Lula may not have sealed a deal, but it has opened a door that both sides can ill afford to leave shut.
Note: This article is published in accordance with an article exchange agreement between Mysteel and AL Circle. |
