Trump announced a 50% tariff on Brazilian goods, escalating the trade dispute between the United States and Latin America's largest economy, causing a sharp decline in Brazilian assets.

On July 9 local time, Trump linked the tariff decision directly to the judicial trial of former President Bolsonaro in a letter posted on social media, accusing Brazil of a "malicious attack on free elections." Bolsonaro is currently facing trial for allegedly attempting a coup after losing the 2022 election.

Due to this tariff, Brazilian assets plummeted, with the real falling nearly 3% against the dollar, and the Brazil ETF in after-hours trading dropping nearly 2%.

President Lula of Brazil quickly convened an emergency meeting with core cabinet members, including the finance minister and foreign minister. Lula responded on social media that Brazil would not be "guided" by anyone and warned that it would respond to any unilateral tariff increases according to Brazil's principle of economic reciprocity.

The United States is Brazil's second-largest trading partner, and a 50% high tariff could have a significant impact on multiple industries in Brazil. Analysts are concerned that this is not just a trade issue but may also damage the long-standing relationship between the two countries.

Market Reaction Severe: Brazilian Assets Sold Off

The tariff threat immediately triggered a sell-off of Brazilian assets.

The Brazilian real fell nearly 3% against the dollar, and the largest U.S.-listed ETF tracking the Brazilian stock market, the iShares MSCI Brazil ETF, dropped nearly 2% in after-hours trading.

American depositary receipts of Embraer, an aircraft manufacturer, fell as much as 9% in after-hours trading. The company is one of Brazil's important exporters to the United States, with transportation equipment (mainly aircraft and aircraft parts) accounting for a significant portion of Brazil's exports to the United States.

Felipe Arslan, CEO of Morada Capital, pointed out that steel products, transportation equipment, specialized machinery, and non-metallic minerals account for a significant part of Brazil's exports to the United States, and these industries will face direct impacts.

Solange Srour, head of Brazilian macroeconomics at UBS Global Wealth Management, said, "This is not just a bilateral trade issue. These tariffs indicate that the overall institutional relationship between nations is deteriorating and being damaged. A 50% tariff may make exports unfeasible in many cases."

Tariff Threats with Political Coloration

Trump's decision to impose a 50% tariff on Brazil clearly has political implications.

In his public letter, Trump directly cited Bolsonaro, a right-wing former president and political opponent of Lula, and linked the tariff decision to the judicial trial of Bolsonaro by Brazil's judicial system.

The charges against Bolsonaro stem from an investigation into the post-election riots in the capital, which are compared to the January 6th events in Washington, D.C., in 2021. Bolsonaro has repeatedly sought help from Trump during his legal difficulties.

On Monday of this week, Trump also defended Bolsonaro, accusing Brazil of politically persecuting the former president. In his letter, Trump reiterated the demand for authorities to drop the charges against Bolsonaro related to the coup attempt, stating, "This trial should not proceed; it is a political persecution that should end immediately."

Analysts are worried that the tradition of maintaining good relations between the United States and Brazil, historical partners, even under presidents with different ideologies, may be at risk due to Trump's decision.

Trade Deficit with the U.S. Also Cannot Escape Tariffs

The United States is Brazil's second-largest trading partner, after China. A 50% high tariff will severely hit several key export industries in Brazil, including steel products, transportation equipment (mainly aircraft and parts), specialized machinery, and non-metallic minerals.

Brazil stands out in Trump's latest tariff targets because the country actually has a trade deficit with the United States. According to data from the U.S. Census Bureau, Brazil imported about $44 billion worth of U.S. products in 2024, while the U.S. imported about $42 billion worth of goods from Brazil.

This contrasts sharply with other countries that Trump has previously announced tariffs on, which almost all have large trade surpluses with the United States. Geraldo Alckmin, Vice President and Minister of Industry and Trade of Brazil, had previously argued that tariffs would also be harmful to the U.S. economy based on the trade surplus.

Moreover, U.S. meat processors have relied on countries such as Brazil to increase supply. In 2024, the U.S. imported about $1.4 billion worth of beef from Brazil, and the import volume in the first five months of 2025 exceeded that of the same period in 2024.

Brazil also produces tropical products such as coffee and cocoa that cannot be grown domestically in the U.S. According to data from the U.S. Department of Agriculture, the U.S. imported nearly $2 billion worth of coffee from Brazil last year.

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