Economists express that Trump’s tariffs on China, Canada, and Mexico will not have immediate repercussions on Brazil; however, broader economic challenges from inflation and interest rates may follow. The Brazilian economy faces threats of stagflation amid high interest rates and currency depreciation. As exporters monitor U.S. tariffs on wood products, there are concerns regarding potential adverse effects on Brazilian competitiveness in international markets.
Economists assess that the tariffs enacted by President Donald Trump on China, Canada, and Mexico could influence Brazil’s trade, but not immediately. They express concern regarding the secondary effects of the tariff conflict, such as increased inflation and reduced economic activity in the U.S., high U.S. interest rates, and a stronger dollar, which coincides with Brazil’s Central Bank’s efforts to manage domestic inflation.
Sergio Vale, chief economist at MB Associados, warns that the extensive tariff hikes could push the U.S. economy toward stagflation, impacting global economic conditions. He indicates that further retaliatory measures could lead to a decline in U.S. GDP exceeding one percentage point, stating, “Trump could still reverse his policy, but signs suggest he will double down on the same mistakes from his first term.”
In Brazil, the economic landscape is further complicated by issues such as currency depreciation and high interest rates, making an already slowing economy even more vulnerable. Vale commented, “The U.S. measures only worsen this scenario, dragging us into a more adverse situation, with potential stagflation here as well.”
Nicola Tingas, chief economist at ACREFI, notes that, in terms of direct trade impacts on Brazil, immediate consequences are minimal. The eventual ramifications will depend on the trajectory of the tariff conflict and how involved nations adjust their trade strategies. Thus, while Brazil is moderately shielded due to a balanced relationship with the U.S., prolonged effects are anticipated.
However, Brazil remains susceptible to fluctuations in U.S. interest rates and the value of the dollar. The situation proves to be intricate, as various market forces exert conflicting influences. Tingas recommends that Brazil enhance its domestic economic resilience to better navigate potential global downturns.
The Brazilian government is adopting a cautious approach while anticipating a phone discussion among key officials to address these trade concerns. The scheduled call between Vice President Geraldo Alckmin and U.S. Commerce Secretary Howard Lutnick was postponed, but sources suggest it may occur soon.
Brazilian exporters are particularly attentive to a recent U.S. executive order initiating an investigation that could result in higher tariffs on wood products. Livio Ribeiro, a partner at BRCG, highlights that the rationale parallels prior tariffs imposed on steel and aluminum, justified by claims of national security and market share issues.
Although these wood products are not among Brazil’s top exports, the United States is a significant market for Brazilian furniture and lumber. Welber Barral, former Brazilian foreign trade secretary, warns that new tariffs could impose constraints on Brazilian competitiveness in the U.S., potentially resulting in increased tariffs or quotas on exports.
This investigation may take up to 270 days to conclude, and given President Trump’s assertive stance, Vale suggests that tariffs might be heightened. He emphasizes that securing alternative markets for Brazilian exports may prove challenging amidst a global economic slowdown.
In summary, Brazilian economists indicate that while immediate effects of U.S. tariffs on Brazil may be minimal, the broader implications could include economic sluggishness and potential stagflation within Brazil. This complex backdrop necessitates a focus on strengthening Brazil’s domestic economy as the global trade landscape continues to evolve under U.S. trade policies. The Brazilian government is awaiting further discussions with U.S. officials to navigate potential trade impacts.
Original Source: valorinternational.globo.com
