Crisis or chance? Understanding Trump's tariffs and how they affect Brazil and the world

Trump's new tariffs, with high taxes on products from various countries, is generating tensions over the direction of foreign trade and the impacts on the international market. For Brazil, the measure could mean both an increase in export costs and opportunities to expand agribusiness, especially in partnerships with Asia and the European Union. Come along with Domani Consultoria Internacional and find out how this change could impact your business!

Anyone who kept up with the world news in March and April might have heard about US President Donald Trump's decision to slap across-the-board tariffs on several countries around the world, including Brazil. Trump's tariffs caught the attention of many economists and traders involved in the international scene because they break with various principles defined by the World Trade Organization (WTO) and also threaten the stability of global trade policy.

This news has suddenly shaken the economies of various sectors around the world, and in Brazil it has first-hand worried the agribusiness sector, which is responsible for a significant portion of exports to the United States. As a result, the uncertain future of the world economy raises a number of questions: why did Trump make this decision? What are the impacts on the Brazilian economy? Will exporters be affected?

This article explores the reasons why the US president adopted these measures in the first months of his second term. In addition, Brazil's perspective on the new tariffs will be discussed, highlighting the consequences for Brazilian foreign trade. Finally, we will present the strategic measures adopted by national policy to help the Brazilian export sector remain stable in the face of the US tariffs.

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What are these tariffs and what motivated Donald Trump?

According to this year's National Trade Estimate Report, a tariff stipulation document published annually by the United States, Donald Trump not only assumes the presidency of the country in 2025, but also adds several clauses to the report. Since his first term in 2016, the president has been skeptical of deregulated international trade and trade cooperation agreements: in fact, he sees these policies as unfavorable to the country.

The so-called American “tariff package”, signed into law on April 2 of this year, refers to a tax adjustment by the United States towards other countries. In this respect, the measure seeks to tax imports from practically the entire globe, reaching 186 countries or regions.

The justification for the act was the US trade deficit, i.e. the scenario in which a country imports more than it exports. According to Trump, by taxing imports, the United States can recover from the economic downturn by promoting incentives for the production and consumption of domestic products. Thus, while stimulating the domestic economy and reducing foreign dependence, the president claims that American protectionism is essential for generating services and strengthening the country's industrial competitiveness. However, this measure was carried out without prior consultation with the WTO, making foreign trade unstable and unpredictable.

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There are those who question whether the motivations behind the tariffs stop there, but the reality is that Trump's intentions are even greater. In addition to valuing domestic labour and boosting the US economy, the imposition of tariffs symbolizes a reaffirmation of the strength of the United States in the face of rising powers in the world, such as China. In other words, this attitude contributes to repositioning the country as the center of international negotiations, especially by transgressing already established multilateral agreements.

To this end, the American president, in the first year of his second term, applied tariffs ranging from 10 to 50%, depending on the foreign tariff on American products, i.e. “economic reciprocity”. In Brazil's case, the minimum rate (10%) was applied, since the country also applies this tax to goods imported from the United States.

How do the new taxes affect the international market?

• Asia:

  
  

One of President Donald Trump's main focuses with the new global tariffs is related to the growing trade dispute with China. In this case, at the beginning of April, the US government raised taxes on goods imported from China to 54%. From then on, both countries started a “trade war”, in which they progressively raised taxes on each other. To date, the Chinese government has applied 84% to American products, while Trump has applied 125% to Chinese products. The main sectors affected by these decisions are agriculture and steel and aluminum production.

Japan has also been hit hard by the US president's new measures, with a 24% tariff on its imports, which, according to the Daiwa Research Institute, could reduce the country's GDP by 0.6%. The sector most affected by this was the automobile industry, as the United States announced a 25% tariff on all car imports, dealing a heavy blow to the Japanese industry, which is responsible for around 3% of GDP.

As a result, some efforts have been made to deal with the trade tensions arising from these measures, such as the meeting between the ministers of industry and trade of Japan, China and South Korea. The main objective of this meeting is to strengthen regional cooperation, such as accelerating a “trilateral free trade agreement”, as well as encouraging a predictable business environment. The idea is to counteract the damage caused by taxed exports in the automotive and agricultural sectors through measures to combat protectionism and the fragmentation of the global economy.

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• European Union:

  
  

The member countries of the European Union have been slapped with 20% tariffs on exports of their products to the United States, as well as a 25% tariff on steel, aluminum and cars. Faced with this reality, the economic bloc has approved some retaliatory measures, such as tariffs of around 25% on US imports, including corn, wheat, clothing and fruit.

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In addition, the EU began negotiating a free trade agreement with the United Arab Emirates, with the aim of bringing bilateral relations between the countries closer and promoting a globalized economy. This agreement was not the first announced by the bloc in response to Trump's protectionist policies, since a new trade agreement was signed with Mexico on January 17, which aims to increase European exports, especially in the agricultural sector. This reinforces Europe's efforts to diversify its markets and expand trade and diplomatic relations around the world.

What about Brazil: crisis or chance?

In this uncertain scenario, Brazil has some opportunities with both Asia and the European Union. Thus, a favorable scenario for increasing sorghum exports is predicted, due to an agreement signed by Brazil and China, which is expected to increase purchases of Brazilian soybeans, as occurred during the first Trump administration. Therefore, with the quest to expand markets in China, it is expected that other Brazilian agricultural products will follow the same line as sorghum, intensifying the commercial partnership between the two countries.

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In addition, the Mercosur-European Union agreement has a new opportunity to come to fruition more quickly. In view of this, approval by two bodies, the Council of Ministers and the European Parliament, must take place with a greater degree of urgency due to the uncertainties of the US “tariffs”.

In this way, the international economic opening in the face of the protectionist offensive is the greatest opportunity for Brazilian exporters, since there is an expectation of new multi- and bilateral treaties and the realization of partnerships that are not destined for the United States. The competitiveness of Brazilian products, at this stage, tends to increase with the reduction in US imports, with an emphasis on the expansion of agribusiness and the Chinese market.

How can Domani help you?

Faced with the new tariffs imposed by Donald Trump, international trade is going through a time of instability and unpredictability, but also of searching for strategies and adaptation. For Brazil, although there are obvious risks, such as the increase in export costs to the US, there are also promising alternatives. In this sense, both the strengthening of partnerships with Asia and the acceleration of the Mercosur-European Union agreement represent real opportunities for Brazilian exporters.

Therefore, in this scenario of uncertainty and rapid change, having expert advice makes all the difference. Domani Consultoria Internacional is ready to help your company understand the impacts of the new tariffs and turn challenges into new growth paths. Click on the button below and talk to one of our consultants!

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