On July 16, the United States announced 25% tariffs on a broad range of Brazilian imports, effective July 22, following a yearlong Section 301 investigation into what Washington deemed unfair trade practices. Secretary of State Marco Rubio framed the decision in personal terms, accusing Lula of putting “his ego ahead of making a deal” and setting the tone for what has quickly become as much a political confrontation as a trade dispute.
What the tariffs actually cover
The scope is narrower than the headline suggests. Two thirds of Brazilian exports to the United States escape the new duties — including coffee, beef, orange juice, crude oil, and aircraft parts. The exemptions reflect a lesson from 2025, when broad tariffs on Brazilian goods including coffee triggered inflationary pressures in the US and were subsequently struck down by the Supreme Court. The products effectively hit are concentrated in machinery, electrical equipment, gold, tires, sugar, and apparel. A separate Section 301 investigation into forced-labor enforcement, due July 24, could add a further 12.5% duty, rebuilding a cumulative 37.5% barrier.
The legal rationale is also more constrained than it appears. In her column for PIIE, Monica de Bolle points out that the US demands implicitly asked Brazil to violate its own trade law and its Mercosur commitments, making a deal structurally impossible from Brasília’s side. One of the six counts in the investigation found it “fundamentally unfair” that Brazil grants tariff preferences to Mexico and India. However, these preferences are fully consistent with WTO rules governing developing country arrangements since 1979. Crucially, the US runs a goods trade surplus with Brazil of $14.4 billion — more than double the prior year — making the “unfair trade” framing analytically awkward.
Washington’s new tariffs are also a way to “punish” Brazil for adopting its own national digital payment system “PIX”. The technology has had a huge success as it is ran by Brazil’s Central Bank and is free of charge for individuals. As a result, the widespread adoption of PIX in Brazil has led to market-share losses for Visa and Mastercard, two U.S. companies.
The electoral dimension
Washington’s renewed pressure lands three months before Brazil’s October presidential election. However it may prove counterproductive for Washington’s preferred outcome. Indeed, Lula’s campaign is already mobilising around the slogan “TariFlávio”, linking the tariffs to Flávio Bolsonaro who reportedly lobbied Washington for their imposition. By doing so, Lula is framing the dispute as an attack on Brazilian sovereignty.
The Brazilian president’s approval ratings actually rose when the tariffs were first proposed in June. The same dynamic is now reinforcing itself. Ironically, Flávio Bolsonaro has asked Trump to delay the tariffs until after the election. An acknowledgement that the measure is politically damaging to the candidate Washington presumably wants to win.
Brazil’s response and leverage
Lula has pledged countermeasures under Brazil’s Economic Reciprocity Law and a WTO challenge. The most potent instrument available is the suspension of intellectual property obligations in agriculture, pharmaceuticals and technology — sectors where US companies derive significant income from Brazilian operations. Brazil has also shown structural resilience to US trade pressure: since the first round of tariffs in 2025, exports to China have reached 37% of total trade, while shipments to India are up more than 50%, reducing Brazil’s dependence on the US market to a record low. The agreement recently concluded between the EU and MERCOSUR, as well as the ongoing negotiations between Canada and MERCOSUR, both show that Brazil could go even further down this path.
Implications for businesses and investors
For companies operating in or trading with Brazil, the immediate picture is one of contained but real disruption. The exemptions protect the most traded commodities. However machinery, industrial equipment and consumer goods exporters into the US market face a meaningful cost increase. The broader signal matters more than the specific tariffs: Washington has demonstrated willingness to use trade instruments against a country with which it runs a surplus, for reasons that are as political as they are commercial. Ahead of October’s election, the tariff episode seems to have simultaneously boosted Lula’s electoral position and raised the question of whether a Flávio Bolsonaro presidency would bring the trade normalisation that markets have been anticipating.
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