Economists indicate that while the U.S. tariffs imposed by Donald Trump may not have an immediate impact on Brazil, the long-term consequences of the tariff conflict, including inflation and currency concerns, could prove detrimental. By focusing on strengthening its domestic economy, Brazil might mitigate adverse effects from the evolving trade situation. Additionally, the scrutiny of U.S. tariff investigations into wood products poses potential challenges for Brazilian exporters.
Economists assert that the tariffs imposed by former President Donald Trump on countries like China, Canada, and Mexico may not immediately affect Brazil’s trade. The focus lies on the anticipated broader implications of the tariff conflict, which include potential inflation in combination with subdued economic growth in the U.S., high American interest rates, and a strengthening U.S. dollar. Brazil’s Central Bank is concurrently addressing domestic inflation.
Sergio Vale, chief economist at MB Associados, commented on the situation, stating, “The aggressive set of tariff increases in the U.S. could push the American economy toward potential stagflation.” He highlighted that the repercussions would likely echo globally. Vale indicated that retaliations from other nations could lower U.S. GDP by over one percent, suggesting Trump might reinforce his prior policies, resulting in slower global growth or a possible recession.
Vale elaborated that Brazil faces heightened challenges due to negative currency depreciation impacting the economy. Already projected to encounter a slowdown from elevated interest rates, Brazil’s situation could worsen due to U.S. tariffs, potentially leading to domestic stagflation. Nicola Tingas, chief economist at ACREFI, remarked on the initial limited impact on Brazil, emphasizing that the actual consequences will depend on the trajectory of the trade dispute and the reactions of involved countries.
Brazil remains vulnerable to U.S. interest rates and the strength of its currency, with market dynamics creating a complex scenario. Tingas proposed that Brazil should prioritize strengthening its domestic economy to be better positioned amidst uncertain global conditions. The Brazilian government is awaiting a dialogue between Vice President Geraldo Alckmin and U.S. Commerce Secretary Howard Lutnick regarding trade matters, although this conversation has yet to be scheduled.
Meanwhile, Brazilian exporters are anxiously observing a recent U.S. executive order that may lead to increased tariffs on wood products, including timber and furniture. Livio Ribeiro from BRCG pointed out the rationale behind the measure, which aligns with the broader imposition of tariffs on steel and aluminum under the guise of national security. Ribeiro mentioned that these items may not be major exports for Brazil, yet the U.S. and Europe remain key markets for its furniture industry.
Welber Barral, former foreign trade secretary in Brazil, warned that new trade barriers could significantly affect the competitiveness of Brazilian goods in the U.S. market. The anticipated investigation regarding these tariffs may take up to 270 days to finish, and Vale expressed concerns about the likelihood of increased tariffs, stating, “Given Trump’s increasingly aggressive stance, it is likely that tariffs will be raised.” He added that finding alternative buyers in a global economy on the decline will not be straightforward.
In conclusion, the tariffs imposed by the United States may not have an immediate effect on Brazil’s trade; however, the broader implications of the trade war, particularly concerning inflation and currency strength, could adversely affect Brazil over time. Economists like Sergio Vale emphasize that Brazil must focus on strengthening its domestic economy to navigate potential adverse outcomes. The monitoring of U.S. initiatives regarding tariffs on specific industries like wood products is essential for Brazilian exporters. The uncertainty accompanying the ongoing trade dispute necessitates prudent government actions and preparedness in the face of possible economic pressures.
Original Source: valorinternational.globo.com
