How Brazil's largest economy will suffer from Trump's tariff hike

São Paulo is the state that stands to lose the most, in absolute terms, from the 50% tariff on Brazilian imports announced by U.S. President Donald Trump, which is set to take effect on August 1. The country's largest economy relies on the U.S. for a significant portion of its trade balance, which is expected to decline if the tariff hike comes to fruition.

According to a survey by the Center for Studies in Economic and Environmental Modeling at the Federal University of Minas Gerais (Nemea-UFMG), a drop of R$4.4 billion in the Gross Domestic Product (GDP) of the state of São Paulo is expected, falling 0.13% in 2025. The impact on other units of the federation would be less than R$2 billion.

"These values suggest that the country's largest economies would be the most affected in absolute terms by the tariff measures, reflecting the weight of the sectors most affected by the tariff measures and their integration into national and international production chains," the Nemea-UFMG document points out.

This impact is reflected in the size of the North American market for São Paulo. In the first half of this year, the state exported a total of US$6.4 billion to the US, representing 31.9% of all Brazil's exports to Donald Trump's country . Rio de Janeiro is second on the list, with half of what São Paulo's manufacturing sector exported (US$3.2 billion).

Trade between São Paulo and the United States has been growing. From US$7 billion in 2020, it jumped to US$13.3 billion, nearly doubling in five years. Before the tax—including the previous 10% tax—there was an expectation of a new record for this flow.

The United States is São Paulo's main trading partner : between January and June 2025, this flow accounted for 19.4% of the state's exports. Proportionally, São Paulo's trade with the US is only surpassed by that of Ceará (51.9%), Espírito Santo (33.9%), and Sergipe (31.4%).

Among the most affected products are aircraft produced by Embraer, whose main customers are North American companies— approximately 60% of the manufacturer's revenue comes from the United States . This year alone, US$872 million worth of aircraft have been shipped to the United States. Besides aircraft, fruit juices and civil engineering equipment are among the most exported products.

São Paulo's productive sector calls for negotiations to mitigate the effects of Trump's tariff hike

The potential risk to São Paulo's production sector triggered reactions from the state's main representative bodies. The Federation of Industries of the State of São Paulo ( FIESP ) spoke about the importance of relations between Brazil and the United States and called for "diplomacy and balanced negotiations to prevail, regardless of ideologies and personal preferences, and for common sense to once again guide the relationship between these two great sovereign nations."

In turn, the Federation of Agriculture and Livestock of the State of São Paulo ( Faesp ) highlighted the importance of agribusiness to Brazil's trade balance and the potential losses for the sector due to the increase in US tariffs. Furthermore, it called for expedited negotiations.

"Brazil needs to adopt a more active stance at the negotiating table, strengthening permanent channels of dialogue with the US, as well as other partners, and using multilateral agreements and international forums as tools for pressure and defense," the entity said in a statement.

Governor Tarcísio de Freitas (Republicans), who criticized President Luiz Inácio Lula da Silva (PT) for Trump's extra taxation, directed his speech in the following days to defend São Paulo and ask for a negotiated solution to reduce future impacts on the state's economy — other presidential-candidate governors also backed down after criticizing the Lula government.

"At this moment, I have to look at the state of São Paulo . I am the governor of the state, there are interests that need to be preserved, the interests of our companies and our producers. And that is what we have to put first. I am talking about jobs, I am talking about family peace, so at this moment, that is the defense I am making," he said last Saturday (12).