Brazil avoids major tariff hike after last-minute U.S. exemption

Brazil’s president scored a key victory Wednesday after the White House eased tough penalties on Brazilian exports, avoiding a potential trade clash between the two countries.

Important products like Embraer’s passenger jets and orange juice were spared from a big tax hike, staying at the current 10% duty instead of jumping to 50%. The change, now delayed until next week, gave some relief to businesses and traders after Trump had warned of broad tariffs on Brazilian goods.

Bloomberg says the announcement took Brasília by surprise, given its limited recent dialogue with Washington.

Instead of passing through diplomatic channels, President Luiz Inácio Lula da Silva’s team enlisted prominent commercial leaders, including executives from Embraer, to make Brazil’s case directly to U.S. officials.

Lula resisted U.S. demands to intervene in Brazil’s judiciary or derail the legal proceedings against former President Jair Bolsonaro.

He stressed the autonomy of Brazil’s Supreme Court, a position admired domestically but criticized by hardliners in Washington who argued it warranted stricter U.S. measures.

Ultimately, Trump clarified that the advertised “50 percent tariff” would not apply uniformly.

Now, Lula needs to turn this short-term break into a lasting deal with the U.S., Brazil’s second-biggest export market.

Bolsonaro’s upcoming trial for an alleged coup could bring new pressure from the U.S. and put these trade breaks at risk. There’s also worry that sanctions from Justice Alexandre de Morae, issued just hours before the tariff news, could lead to more action against Brazilian officials.

Important sectors like coffee and beef were not included in the exemptions and may need government help to protect farmers and exporters. With inflation rising and possible new tariffs ahead, the central bank decided on Wednesday to leave the Selic interest rate unchanged.

At the presidential palace, Lula called the exemptions “a sacred win for our sovereignty,” saying they prove Brazil can resist outside pressure without giving up its judicial independence.

In the aftermath of Trump’s initial threat of 50% duties, top Brazilian officials had braced for the worst. Cryptopolitan reported earlier how Brazilian governors criticised Lula for his talks with the U.S.

Finance Minister Fernando Haddad and Vice President Geraldo Alckmin showed growing frustration with U.S. negotiators, pointing out that Brazil has a trade deficit with the U.S., unlike many other countries hit by Trump’s tariffs.

Lula defends Brazil’s Independence in tariff fight

While the U.S. worked on the exemption list, Brazil was mostly kept in the dark. On Wednesday, Foreign Minister Mauro Vieira met with U.S. Secretary of State Marco Rubio in Washington.

He said it was unfortunate that two centuries of partnership had become political. Vieira shared Lula’s view that Brazil is open to trade talks, but its justice system is not up for debate.

Soon after, Brazil’s embassy in Washington sent a message to Lula about the exemptions. He quickly called an emergency meeting with Vice President Alckmin and top advisers, according to people close to the talks.

Haddad hasn’t spoken directly with U.S. Treasury Secretary Scott Bessent yet, but expects the talks to take two to three months, like past U.S. talks with other countries.

Brazilian officials are hopeful they can get more exemptions for goods like coffee and beef, which Brazil leads the world in supplying and doesn’t produce much of at home.

Brazilian companies breathed a sigh of relief. Embraer, which employs over 2,000 people in the U.S., said the exemptions showed its importance in the region. CEO Francisco Gomes Neto jokingly called himself the “Chief Tariff Officer.” Embraer’s stock jumped 11% after the news.

Itau now expects the average tariff on Brazilian goods to be around 30%, lower than the earlier estimate of 40%. This change also makes it less likely that Brazil will strike back, easing the risk of a bigger conflict

Cryptopolitan Academy: Tired of market swings? Learn how DeFi can help you build steady passive income. Register Now