Economists believe that Trump’s tariffs will eventually affect Brazil’s trade but not immediately. The broader ramifications of the tariff conflict pose risks, including inflation and high U.S. interest rates. Observations point to caution as Brazil monitors potential U.S. investigations that may introduce tariffs on wood products. Future trade dynamics will depend on how the situation evolves.
Economists assert that while the tariffs levied by President Donald Trump on countries such as China, Canada, and Mexico could potentially affect Brazil’s trading dynamics, these impacts will not be felt immediately. Their primary concern lies in the wider ramifications of the tariff conflict, such as rising inflation and subdued economic activity in the United States, alongside high U.S. interest rates and a strengthening global dollar. At this juncture, Brazil’s Central Bank is also striving to manage domestic inflation.
Sergio Vale, chief economist at MB Associados, remarked, “The aggressive set of tariff increases in the U.S. could push the American economy toward potential stagflation.” According to Mr. Vale, this situation could lead to a decline in U.S. GDP by more than one percentage point, especially if retaliatory measures are escalated. He further indicated that while President Trump could revoke his trade policy, current signs suggest a propensity to maintain previous errors, which may result in diminished global growth or a recession.
Mr. Vale elaborated that Brazil’s economic landscape will be increasingly precarious due to the depreciation of its currency, with forecasts already indicating slowed economic activity attributed to high interest rates. “The U.S. measures only worsen this scenario, dragging us into a more adverse situation, with potential stagflation here as well,” he observed.
Nicola Tingas, chief economist at the National Association of Credit, Financing, and Investment Institutions (ACREFI), noted that responses from Canada exemplify the rapidly escalating tariff dispute initiated by Mr. Trump. He stated that while Brazil may not experience an immediate impact on trade flows, the longer-term repercussions will depend on how the trade war unfolds and how nations adapt.
Despite Brazil’s relatively balanced relations with the U.S., it remains susceptible to fluctuations in U.S. interest rates and the strength of the dollar. Mr. Tingas advised that Brazil should concentrate on fortifying its domestic economy to secure a favorable position amid potential negative global developments.
The Brazilian government has adopted a cautious approach, anticipating further dialogue between Vice President and Minister of Development, Industry, Trade, and Services Geraldo Alckmin and U.S. Commerce Secretary Howard Lutnick. While a scheduled call on Friday (28) did not occur, it is estimated to take place next week.
Brazilian exporters are vigilantly observing a recent executive order aimed at initiating an investigation into higher tariffs on wood products, including lumber and related merchandise. Livio Ribeiro, a partner at BRCG and researcher at the Brazilian Institute of Economics (FGV Ibre), explained that these tariffs are justified under national security grounds, citing concerns over market share being occupied by imports despite sufficient domestic supply.
Although such products do not rank among Brazil’s top exports, the U.S. and Europe represent crucial markets for the nation’s furniture and wood industries. Former Brazilian foreign trade secretary Welber Barral warned that new trade barriers could significantly impact competitiveness within the U.S. market. “This could lead to additional tariffs or quotas,” he stated. The investigation may endure for as long as 270 days, with Mr. Vale predicting likely tariff increases given the aggressive stance adopted by President Trump, complicating efforts to secure alternative buyers as both global and Brazilian economies continue to slow.
In summary, while Brazil may not experience immediate repercussions from Trump’s tariffs on certain countries, the overall economic ramifications could be significant. High U.S. interest rates and a strong dollar, coupled with potential retaliatory trade policies, may lead Brazil into a more challenging economic situation. Strengthening the domestic economy is crucial for Brazil to navigate the adverse effects of a declining global climate.
Original Source: valorinternational.globo.com
