Friendless in Washington, Brazil relies on US business leaders to fight Trump's tariff hike

Brazilian producers exporting to the US may find relief from the 50% tariff hike announced by Trump with help from American business leaders. Fearing an immediate increase in the prices of Brazilian inputs, they tend to negotiate quotas and exemptions with Washington, which could benefit Brazilian production.

According to Oliver Stuenkel, a professor at the Getulio Vargas Foundation's School of International Relations, mobilizing the American private sector will be crucial. He emphasizes that Brazilian diplomacy should help coordinate this movement toward alternatives to tariffs.

With the new tariffs, price increases are projected across a range of sectors, including construction, manufacturing, and food and beverages. Mobilization by business owners and state governments in Florida, Georgia, Michigan, Ohio, and Texas is already expected.

The sectoral negotiation strategy for quotas or exceptions by the Americans becomes even more relevant in light of possible retaliation from the government of Luiz Inácio Lula da Silva (PT) and the estimate that Brazilian producers could suffer losses of up to US$23 billion by 2026.

Some sectors are already organizing around this strategy. Coffee producer associations, for example, have reached out to their American counterparts to reach a negotiated solution.

"The great hope is that [American] buyers can do this work for Brazil," says the professor. He believes that U.S. importers can carry more weight in the negotiations, especially considering Trump's rhetoric focused on "defending American interests."

Negotiation channels between Brazil and the United States are obstructed

Stuenkel notes that there are few official channels for direct negotiations between the Brazilian and US governments. Trump himself stated over the weekend that he might call President Lula—"but not now."

"Brazil doesn't have a super-operation in Washington that can be activated at short notice. It doesn't have any American senators who are friends of Brazil and who can call Trump and negotiate. Israel has that, Mexico has that, but Brazil doesn't," says the professor.

Meanwhile, the Brazilian government has already signaled its intention to use the Economic Reciprocity Act, which provides countermeasures against tariffs like those imposed by Trump. However, this response could backfire on Brazil itself.

Brazil is a secondary trading partner for the US

Since Brazil is only the US's 15th-largest trading partner, the tariff announcement—made in a letter from Trump to Lula—had no significant impact on the American market. The issue did not gain public attention, nor did it generate pressure on the White House, which reduces the prospect of direct negotiations by the Brazilian government.

According to William Castro Alves, chief strategist at the international investment platform Avenue, the explanation is simple: "Brazil's importance to the United States is quite limited. That's the truth. The impact on the American economy is very small," he states. Even with price increases in some sectors, a significant inflationary effect is not expected in the US.

Brazilian associations are negotiating directly with partners in the US

Faced with this scenario, some national sectors are organizing to find a solution to the tariffs imposed by the US. The Brazilian Coffee Exporters Council (Cecafé) and the National Coffee Association (NCA)—a North American organization representing roasters, retailers, suppliers, and large companies—are studying an alternative solution for the sector.

The objective of the negotiation is to include coffee in a list of exceptions to the tariffs, with the argument that the product is not produced in the United States, the country that is the world's largest buyer of the commodity.

In Brazil, coffee leads agribusiness exports to the US. In the first half of this year, sales totaled US$1.2 billion—equivalent to one-sixth of the sector's total foreign trade with the country.

Stuenkel points out a mistaken view: that the only solution would be to completely reverse the tariffs. According to him, American industry tends to negotiate specific exemptions, not a broad repeal. "There are a thousand ways to offer exceptions, quotas. It's often thought that either tariffs apply to everyone, or they are revoked for everyone—and that's not how it works," he asserts.

There are even sectors of the American economy that may support maintaining tariffs for protectionist reasons. This includes those benefiting from Section 232 , which authorizes the U.S. president to impose import restrictions on products considered strategic to national security, such as semiconductors, critical minerals, and pharmaceutical ingredients.

Affected states likely to lobby Trump administration for exceptions

Still, the concentrated effects on certain sectors or regions of the US could play in Brazil's favor in discussions about Trump's tariff hike. Stuenkel explains that the more geographically localized the impact, the greater the chance of political pressure.

"If there's a problem affecting three million people in a state, the governor will take it to the White House. But if those people are spread out across the country, there may be no political impact at all."

The American construction industry is expected to be one of the hardest hit. Inputs such as cement, steel, lumber, ornamental stone, screws, and finishing materials will see immediate cost increases. Companies in Florida and Georgia, for example, could see cement prices skyrocket, which would affect public and private projects.

According to a report by XP Investimentos, the new 50% tariff will be applied on top of existing rates. In the case of steel and aluminum, which are already taxed at 50%, the total could reach 100%. Even so, Brazilian companies with operations in the US can mitigate some of the impact and even redirect their production strategy.

Trump's tariff hike could force American companies to reconsider their purchases

The automotive industry could be affected, even if it doesn't buy finished parts from Brazil. The rise in imported steel prices is putting pressure on automakers' costs.

In the aerospace sector, companies like American Airlines, which operate Embraer aircraft, may postpone or cancel acquisitions for fleet renewal. The new tariff could reduce Embraer's operating profit by up to US$220 million—equivalent to 35% of its 2025 projection.

In the food sector, the price hike would affect items like coffee, orange juice, and canned meat. According to Stuenkel, the beverage and processed food industries have little room to absorb the increases.

A report by TD Cowen analyst Andrew Charles estimates that Starbucks' profit could fall 1.4% due to the rise in coffee prices—a product in which Brazil leads exports to the US, accounting for 22% of the total in 2024. However, William Castro Alves points out that commodities like coffee can easily be replaced by products from Colombia, Ethiopia, or Indonesia.

Brazil's response to Trump's tariff hike will be crucial to the outcome

Despite the efforts of American industry, the real impact of the tariffs also depends on Brazil's response. William Castro notes that, so far, countries that have adopted tariff retaliation have merely "escalated" the dispute, failing to effectively reverse it. "It became clear that seeking reciprocity or also imposing tariffs on the US was not a smart strategy for those who attempted this," he states.

The Brazilian government plans to regulate the Economic Reciprocity Law this week. According to Vice President Geraldo Alckmin, the measure will be published by Tuesday (15). A committee with government and private sector members will also be created to evaluate next steps. Depending on Brazil's stance, American mitigation efforts could be strengthened—or thwarted.