Proposed U.S. tariffs could cut Brazil's GDP by as much as 0.8%

UPI

21 hours ago

July 14 (UPI) -- The 50% tariffs proposed by Donald Trump could cut Brazil's gross domestic product by between 0.3 and 0.8 percentage points in 2025, according to Brazilian economists and consulting firms.
The final impact will depend on how Luiz Inacio Lula da Silva's administration responds and whether Brazil can redirect its exports.
Brazil's annual export loss could range from $12 billion to $17 billion, representing 3.6% to 5% of the country's total exports, according to Rogério Marin, CEO of Tek Trade and president of the Foreign Trade Companies Union of Santa Catarina, in comments to the Brazilian digital outlet Agricultura y Negocios.
Marin estimates an annual negative impact on GDP of between 0.6% and 0.8%.
According to XP, one of Brazil's major investment and financial services firms, the tariffs could reduce GDP growth by 0.3 percentage points in 2025 and 0.5 percentage points in 2026, with Brazilian exports to the United States projected to fall by $6.5 billion in 2025 and $16.5 billion the following year.
Agribusiness firm FGVAgro said in a statement that the proposed 50% tariff would particularly impact the agricultural sector, which accounts for 30% of exports to the U.S. market.
"Food exports are estimated to fall by as much as 75%, which could cause a contraction of up to 0.41% in Brazil's GDP. Domestic consumption is also projected to decline by as much as $13 billion," the firm said.
Brazil's National Confederation of Industry, or CNI), and other business groups have urged a diplomatic resolution. "A rupture in the relationship with the United States would cause serious harm to our economy," said Ricardo Alban, president of the CNI, who called for "intensifying negotiations to reverse this decision."
The American Chamber of Commerce for Brazil, Amcham Brasil, has urged avoiding a trade war, saying it "has no winners." The group argues that the arbitrary imposition of tariffs serves neither side's interests and instead creates uncertainty that discourages investment and economic growth.
Brazil maintains a strong trade relationship with the United States, exporting about $41 billion annually, primarily in industrial and agricultural goods. That volume represents roughly 1.7% of Brazil's GDP.
"Brazilian industry -- especially manufacturing -- has broken export records to the United States in recent years, underscoring the importance of maintaining a stable trade environment," said Marcos Santos Carena, director of the Business Observer, a consulting firm that operates in Brazil, Colombia and the United States.
The announced tariffs could significantly impact several sectors of Brazil's economy. Experts warn that about 40% of the affected exports are manufactured goods with limited potential to be redirected to other markets.
The agricultural and agribusiness sectors could be among the hardest hit, as the United States is a key market for products such as coffee and orange juice. One-third of the coffee and half of the orange juice consumed in the United States comes from Brazil, Santos Carena said. Other agricultural exports could also be affected.
In the aerospace sector, Embraer -- the Brazilian aircraft manufacturer -- has been identified as one of the companies that could be hit hardest, with sharp declines in its market value. The tariffs could hurt the competitiveness of its exports to the United States.
Brazil's steel and aluminum industries are already subject to additional tariffs, and a new 50% levy would make these exports unviable, according to industry representatives.
Although the United States accounts for a small share of Brazil's mining exports -- about 4% -- the tariffs could affect sales of gold, natural stones, ornamental rocks, iron ore, kaolin and niobium.
Other exports that could be affected include engines and generators, parts for industrial machinery, data processing equipment, measuring instruments, wood and forest products -- such as pulp and fiberboard -- and meat.
In a meeting lasting more than four hours at the Palácio da Alvorada on Sunday, Lula convened his cabinet ministers -- including those from finance, industry, agriculture, and foreign affairs -- along with the Central Bank president and Senate leaders to coordinate a response to the tariffs announced by President Donald Trump.
Among the agreed measures was the creation of a committee led by Vice President Geraldo Alckmin. The group, which includes business leaders, will bring together affected sectors to develop joint proposals and advise the president before any official announcement.
The government pledged to issue a decree by Tuesday outlining legal and technical criteria for triggering countermeasures if the U.S. tariffs take effect Aug. 1, as Trump promised.
While officials have not ruled out reciprocal action, Lula's administration said its priority is negotiation, multilateral diplomacy -- through channels such as the World Trade Organization -- and non-tariff solutions.