Trump’s ill-advised trade war with Brazil

Opinion

It’s worth remembering that Brazil and the United States, long regional rivals, are deeply suspicious of the others’ motives, are concerned about issues around dominance, control and independence and are locked in a tug-of-war to be recognized as the major power-broker in the wider region.

The Brazilians, in particular, are open to cordial relations with Washington, but will not take their marching orders from the U.S. White House. The Americans, for their part, just want Brasilia to advance a policy agenda of supporting U.S.-friendly countries, following the U.S. lead, ensuring open markets and an attractive investment climate and fostering a stable order in the Americas.

Recently, Trump did something ill-conceived, impulsive and counterproductive by imposing a stiff 50 per cent tariff (higher than any other country in this second tariff round) on all imports from Brazil — which is the largest economy in the region — on Aug. 1. In turn, Brazil’s leftist president, Luiz Inácio Lula da Silva, promised to respond in kind against U.S. products entering the South American country.

Of course, there is nothing new about Trump imposing trade tariffs on other countries — as Canada can well attest. But what is new (and potentially very troubling) is that he appears to be doing so not on economic or commercial grounds.

In fact, the U.S. actually registers a trade surplus with Brazil of some US$7.0 billion in 2024 — and roughly US$410 billion over the last 15 years. Some of America’s largest businesses, such as Exxon Mobil, BlackRock and General Motors, have also found a welcoming corporate investment environment in Brazil.

Instead, Trump has singled out Lula and Brazil’s efforts to prosecute former far-right Brazilian president, and Trump’s close friend and fellow traveller, Jair Bolsonaro for trying to discard the 2022 presidential electoral outcome. It is well known within Brazil that Bolsonaro had concocted plans to immediately call the election results fraudulent, to mobilize a supportive Brazilian military, to assassinate Lula (along with his vice president and a Supreme Court Justice) and to unconstitutionally cling to power through a coup d’état.

Not surprisingly, Trump sees things much differently. He argues that Bolsonaro has been the victim of a political “witch hunt” and much worse. In his July 9 letter to Lula, Trump noted angrily: “The way that Brazil has treated former President Bolsonaro, a Highly Respected Leader throughout the World during his Term, including by the United States, is an international disgrace.” (There are also U.S. complaints against the Brazilian government for taking regulatory action against major American tech companies and social media platforms for disseminating misinformation and disinformation about Brazil’s 2022 presidential election and its aftermath.)

Bolsonaro, once dubbed the “Trump of the Tropics,” was ideologically aligned with Trump and his MAGA base when he held political office from 2019-2022. Remember, there were people in Trump’s inner circle in early 2023, such as Steve Bannon and Jason Miller, who wanted Bolsonaro to remain in South Florida and thus avoid facing prosecution for his alleged crimes.

Since April of this year, though, the Brazilian National Congress passed the enabling legislation that would grant President da Silva the power to retaliate in kind against any U.S. trade levies. After Trump’s recent tariff threat, he stated that “any measure to increase tariffs will be addressed in accordance with the Brazilian Economic Reciprocity Law.”

There is no disputing the fact that Brazil is deeply concerned about triggering a reduction of potentially 75 per cent of its exports to the U.S. (After all, the U.S. is Brazil’s second largest trading partner after China.) But what Trump often fails to consider is the negative repercussions of his tariff tantrums.

For instance, one-third of the coffee and half of the fresh orange juice that Americans consume at their breakfast table comes from Brazil. That means that Americans will automatically be paying more for those imported products and adding to their overall cost of living angst. I also can’t imagine that Trump would want to anger his political base even more than he already has over the last few weeks.

Secondly, Brazilians are very angry over what they believe is Trump’s blatant interference in the country’s domestic political affairs. As Lula pointed out: “Brazil is a sovereign nation with independent institutions and will not accept any form of tutelage.” Accordingly, Trump’s bumbling tariff move has only served to bolster Lula’s standing in the polls.

Then there’s China. The Middle Kingdom has quickly become an important trade partner for Brazil. And Trump’s latest move will only push Brasilia even closer to Beijing and thereby strengthen China’s growing economic and political presence in the Americas.

Clearly, countries that engage in trade wars invariably end up shooting themselves in the foot. Notwithstanding what Trump says, there are no winners in the types of clashes. The best thing for both sides would be for Trump and Lula to take a step back, allow cooler heads to prevail, and to recognize the mutual benefits of their important bilateral relationship.

Peter McKenna is professor of political science at the University of Prince Edward Island in Charlottetown.