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A trade war is imminent between the United States and Brazil following a threat by Brazilian President Luiz Inacio Lula da Silva that his country will retaliate on a tit-for-tat basis to Donald Trump’s suggested 50% tariffs on Brazilian exports. Addressing local media on Thursday, Lula threatened to impose a 50% duty on American goods if Trump’s plan comes into force, heightening concerns of an all-out trade war between the two biggest economies in the Americas.
Retaliating, Lula said Brazil might seek redress from the World Trade Organization, force foreign investigations, or invoke national safeguards under Brazil’s Reciprocity Law legislation enacted to respond to unfair trade barriers. “The most significant thing to note is that Congress passed the Reciprocity Law,” Lula said, and the US allegation of a non-reciprocal trade relationship with Brazil was “erroneous.
The Brazilian president called an emergency high-level ministerial meeting on Thursday morning to design a strategy. The office of Lula’s chief of staff confirmed that a study group would be established to examine retaliatory measures.
Trump, on his part, threatened Brazil not to retaliate with its own tariffs. In a letter to Lula, posted on social media, Trump stated: “If for any reason you decide to raise your Tariffs, then, whatever the number you choose to raise them by, will be added onto the 50% that we charge.”
The threatened tariffs are part of a larger tariff policy Trump unveiled this week, taking aim at several nations such as Bangladesh, Japan, and South Korea. Though initially scheduled to go into effect on July 10, the White House has delayed the implementation until August 1 to give more time for negotiations.
This newest trade tension risks overturning decades of US-Brazil economic relations and could spread through the global supply chain if the two sides don’t negotiate an end to it. Brazil, Latin America’s biggest economy, is now considering diplomatic and legal avenues to resolve the issue while eyeing possible retribution.
