Understanding the New U.S. Tariff Hike on Brazil

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US President Donald Trump and President Lula meet in Kuala Lumpur, Malaysia, 2025. (Photo: Ricardo Stuckert/PR)

The decision by Donald Trump's administration to impose an additional 25% tariff on thousands of Brazilian products represents a new chapter in the growing use of trade policy as an instrument of geopolitical pressure. Although formally based on Section 301 of the Trade Act of 1974, the measure goes beyond strictly economic issues and incorporates regulatory, technological, environmental, and even political elements, making it one of the broadest initiatives adopted by the United States against Brazil in recent decades. Unlike traditional anti-dumping duties or safeguard measures, Section 301 allows Washington to respond unilaterally to what it considers unfair trade practices. The U.S. government concluded that, after approximately one year of negotiations, Brasília had failed to modify policies deemed harmful to American interests, thus justifying the imposition of the tariffs.

The report issued by the Office of the United States Trade Representative (USTR) brings together a wide range of issues under a single trade framework. These include the operation of Pix, access for American ethanol to the Brazilian market, decisions involving digital platforms, tariff regimes granted by Brazil to partners such as India and Mexico, efforts to combat deforestation and piracy, and the protection of intellectual property.

Although all of these issues are presented as commercial justifications, several have a regulatory or political nature. The case of Pix is particularly emblematic. For the first time, a national public payment system has become the subject of an international trade dispute. According to Washington, the Central Bank simultaneously acts as both regulator and operator of the system, favoring Pix over private American companies, particularly card operators and financial technology firms. Brazil completely rejects this interpretation, arguing that Pix is a public, open, and free infrastructure that does not discriminate against foreign companies.

Another relevant issue concerns ethanol. The United States claims it faces difficulties accessing the Brazilian market, while Brasília argues that its tariff policy is fully aligned with multilateral rules. Deforestation also appears for the first time as a central element in a trade investigation of this nature. Washington argues that insufficient enforcement of environmental legislation creates competitive distortions.

What Was Taxed

Despite the broad scope of the measure, the tariff does not apply to Brazil's entire export portfolio. Among the main affected products are:

• ethanol;

• agricultural machinery;

• electrical equipment;

• industrial machinery;

• capital goods;

• chemical products;

• paper;

• clothing;

• footwear;

• tools;

• mining equipment;

• various manufactured goods.

A large share of the taxed products belongs precisely to industrial sectors in which the United States seeks to strengthen domestic production or reduce trade deficits. These are higher value-added sectors where Washington aims to encourage domestic investment. This suggests that the measure has an explicit industrial policy component in addition to its diplomatic dimension.

While thousands of items were subjected to tariffs, several strategic products remained exempt. These include:

• coffee;

• beef;

• oranges and orange juice;

• crude oil;

• natural gas;

• civil aircraft;

• aircraft engines;

• aerospace components;

• pharmaceutical products;

• semiconductors;

• chip manufacturing equipment;

• pig iron;

• pulp;

• timber;

• fish;

• nuts;

• organic honey;

• certain minerals;

• metal products considered strategic.

This list demonstrates that Washington sought to preserve supply chains in which the U.S. economy depends significantly on Brazilian imports. In the case of coffee, there is virtually no sufficient domestic production in the United States. The same applies to orange juice, whose American industry relies heavily on Brazilian supply.

In the aerospace industry, companies such as Embraer continue to play an important role in the U.S. market by supplying aircraft and specialized components. Likewise, products such as pig iron, pulp, and certain metal inputs feed American industrial supply chains, making high tariffs potentially harmful to U.S. manufacturers themselves.

In other words, the list of exemptions shows that the objective is to exert selective pressure on sectors considered more sensitive.

Economic Impact

The impact of the tariffs will not be uniform. Industrial exporting sectors are expected to face a loss of competitiveness, reduced profit margins, possible declines in exports, and the need to redirect sales to other markets. On the other hand, sectors linked to the export of major agricultural commodities, especially coffee, beef, and orange juice, will suffer far less impact than initially feared.

This significantly reduces the overall shock to Brazil's trade balance. According to estimates, approximately US$15 billion in annual exports could be directly affected by the new tariff.

Possibility of Additional Tariffs and the Lula Government's Response

The United States is maintaining a second investigation involving products associated with forced labor. If implemented, this measure could result in an additional 12.5% tariff on certain products. According to the Brazilian government, in some cases tariffs could reach as much as 37.5%, depending on tariff classifications and the cumulative rules that may ultimately be adopted. There is still uncertainty regarding which products will effectively be subject to both charges.

In an official statement, the government fully rejected the decision and described the measure as unjustified. It argued that U.S. data themselves show an American trade surplus in the bilateral relationship, emphasized that 76% of U.S. imports enter Brazil duty-free, and rejected the legitimacy of the Section 301 investigation. The government also reaffirmed that it will not negotiate over Pix, will not accept changes to its regulation of digital platforms, considers the deforestation allegations unfounded, and will continue pursuing market diversification.

At the institutional level, Brasília announced three main courses of action:

1. Economic Reciprocity Law

The government intends to immediately activate the mechanisms established under the Economic Reciprocity Law, recently approved by the National Congress. The legislation allows Brazil to respond proportionally to trade measures considered discriminatory. This does not necessarily mean imposing tariffs of the same magnitude, but it provides the legal basis for adopting countermeasures.

2. World Trade Organization

Brazil intends to bring the issue before the WTO dispute settlement system. Despite the current limitations of the mechanism, particularly due to the paralysis of the Appellate Body, this initiative reinforces Brazil's argument that the dispute should be addressed within the multilateral system rather than through unilateral actions.

3. Trade Diversification

The government also emphasized its strategy of expanding access to foreign markets. In its official statement, it explicitly mentioned the Mercosur-European Union agreement, the agreement with EFTA, and the agreement with Singapore, in addition to seeking new trading partners. This response indicates that Brasília intends to reduce its dependence on the U.S. market over the medium term.

Another relevant aspect is that the episode quickly expanded beyond the commercial sphere. In the United States, officials such as Secretary of State Marco Rubio accused the Lula administration of failing to negotiate "in good faith." In Brazil, members of the government began politically blaming members of the Bolsonaro family, arguing that they had encouraged or facilitated Washington's adoption of the measures. This politicization reinforces the perception that the tariff hike is embedded within the broader political relationship between the two governments.

Final Considerations

The new U.S. tariff hike represents a clear example of the transformation of trade policy into an instrument of strategic competition. The selection of affected products reveals an effort to pressure Brazilian industrial sectors without disrupting supply chains considered essential to the U.S. economy itself. At the same time, the inclusion of issues such as Pix, digital platforms, and deforestation expands the scope of trade disputes into areas traditionally associated with domestic regulation and national sovereignty.

For Brazil, the response is likely to combine three strategies: legal challenges, possible reciprocal measures, and an acceleration of trade diversification. In the short term, the greatest impacts are expected to fall on industrial exporting sectors, while strategic agricultural products have remained relatively protected through exemptions. Over the medium term, the episode could accelerate a reconfiguration of Brazil's trade policy, encouraging closer ties with European, Asian, and Global South markets, while also illustrating how political rivalries and economic interests have become increasingly intertwined in the formulation of contemporary trade policy.