Brazil’s markets and businesses have responded with relief following exemptions to tariffs announced by former US President Donald Trump. The move validates, at least in the short term, President Luiz Inacio Lula da Silva’s initial defiant stance against the 50 per cent tariff threat. Some of Brazil’s largest exports to the US, including civilian aircraft and orange juice, will not face increases beyond the 10% rate previously imposed. Trump plans to implement the tariffs next week, a delay from the originally proposed Friday implementation.
The initial tariff threat came as a shock to the Brazilian administration, which had limited contact with the White House in recent weeks. Instead, they relied on business leaders, including the head of plane manufacturer Embraer SA, to advocate for Brazil in Washington. Embraer is a Brazilian aerospace conglomerate that produces commercial, military, executive and agricultural aircrafts. The company is one of the world’s leading manufacturers of regional jets.
President Lula had resisted US pressure to intervene in the judicial system and halt the prosecution of former President Jair Bolsonaro. While Lula defended the top court, a popular move in Brazil, it seemed to increase the likelihood of tariff hikes. Trump has since clarified that the 50 per cent tariff would not apply to all goods.
The challenge for Lula is to transform this reprieve into a lasting détente with the US, Brazil’s second-largest trading partner. Bolsonaro’s upcoming trial on charges of allegedly attempting a coup poses a risk and could prompt Trump to remove the exemptions.
