São Paulo faces major job and economic losses if the U.S. goes ahead with a 50% tariff on Brazilian goods

Faced with the looming prospect of a 50% U.S. tariff set for Aug. 1, officials in Brazil’s richest state are rushing to soften the blow on local companies and jobs.

Governor Tarcísio de Freitas said on Saturday that as many as 120,000 positions could disappear and gross state product might fall 2.7 % if the U.S. goes ahead with the tariff.

Speaking at a forum hosted by XP Inc. in the state capital, he warned that “the possibility of Caterpillar moving its output to another country” is worrisome, along with the ripple effects on small coffee growers, the orange sector, and aircraft maker Embraer.

According to a Bloomberg report state will give five‑year loans to help firms with cash needs. The governor said his team is also talking to U.S. lawmakers, companies, and officials to explain the danger and push for changes.

Brazilian governors criticize Lula over tariff dispute

Freitas shared the stage with governors Ratinho Junior of Paraná and Ronaldo Caiado of Goiás. They asked the federal government to talk with the U.S., saying the tariff could hurt meat plants and organic sugar producers in their states.

They criticized President Luiz Inácio Lula da Silva’s handling of relations with U.S. President Donald Trump, noting they had not been consulted before key decisions.

“Governors were not consulted by the federal government on these decisions,” Caiado said.

Ratinho Junior added that former president Jair Bolsonaro “is not more important than the trade relationship between Brazil and the U.S.” All three leaders are seen as potential challengers to Lula in next year’s election.

Meanwhile in the U.S the Trump administration is preparing a fresh emergency declaration to justify the tariff, according to people familiar with internal discussions.

Because Brazil runs a goods trade deficit with the United States, unlike most targets of earlier tariff actions, officials are said to be seeking a different legal basis. Staff from the Office of the U.S. Trade Representative briefed congressional aides this week on the plan, the sources said.

Neither USTR nor the White House commented publicly. The news sent the Brazilian real down as much as 1% against the dollar on the day.

Lula urges calm before the U.S tariff storm

President Luiz Inácio Lula da Silva spoke lightly about the threat of U.S. duties, saying Brazil will respond if the tariffs take effect but won’t pick fights it doesn’t need.

At a July event in São Paulo, he stressed the need to safeguard Brazil’s sovereignty and economy. If Washington imposes its planned charges, Lula said Brazil will act, yet always in keeping with its values and global partnerships.

His new finance minister echoed former President Haddad’s assurance that Brazil will not go after U.S. firms on Brazilian soil.

He added that Brazil’s aim is fair trade, not tit‑for‑tat retaliation.

The tariff threat, first aired earlier this month, is widely viewed as support for Bolsonaro, who faces trial over an alleged effort to overturn his 2022 loss.

Trump has urged Lula to drop what he calls a “witch hunt” against his ally. Lula, for his part, has insisted the judiciary is independent and has hinted at retaliatory steps if duties are imposed.

In a Friday address, the Brazilian president said Trump had been “misled” about the case. “If President Trump had called me, I certainly would have explained to him what’s happening with the former president,” Lula said. “Bolsonaro is not being persecuted; he is being tried.”

Two Brazilian officials familiar with the situation argue that drafting a new emergency order shows the 50% rate is “a sanction in search of legal justification.”

While Trump could still alter the number, the levy, if enacted, would take effect in less than a week, keeping state and federal authorities on both sides of the dispute working against the clock.

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