Economists suggest that the tariffs imposed by Trump may not immediately affect Brazil’s trade but could have broader consequences through high inflation and weakened economic activity in the U.S. A weakened Brazilian economy may worsen due to U.S. monetary policies, prompting a cautious governmental approach as key discussions with U.S. officials are anticipated. The Brazilian government and exporters are particularly observant of U.S. actions related to tariffs on wood products that could further impact trade dynamics.
Economists assert that the tariffs instituted by President Donald Trump on China, Canada, and Mexico along with corresponding retaliatory measures may eventually affect Brazil’s trade, though not in the immediate future. Their primary concern lies in the potential broader repercussions of this tariff conflict, which include high inflation paired with stagnant economic growth in the U.S., increased U.S. interest rates, and a globally strengthened dollar. These challenges confront Brazil’s Central Bank as it endeavor to manage domestic inflation.
Sergio Vale, chief economist at MB Associados, indicated, “The aggressive set of tariff increases in the U.S. could push the American economy toward potential stagflation.” He elaborated that the global ramifications might be significant. Expectations suggest that if retaliatory measures continue, U.S. GDP could experience a decline exceeding one percentage point as a direct result of this tariff escalation.
Vale further remarked on Brazil’s precarious situation, noting the detrimental effects of a depreciating currency. Anticipated economic sluggishness compounded by elevated interest rates may worsen due to U.S. policies. “The U.S. measures only worsen this scenario, dragging us into a more adverse situation, with potential stagflation here as well,” he stated.
Nicola Tingas, chief economist at ACREFI, noted that the tariff dispute is intensifying, particularly as evidenced by the responses from Canadian authorities. In terms of impacts on Brazil’s trade flows, he conveyed that immediate effects would be minimal, relying heavily on the evolution of the trade conflict and the adjustments made by involved nations. Countries like Brazil that maintain balanced relations with the U.S. may face longer-term effects.
Despite a relatively stable relationship, Brazil remains vulnerable to fluctuations in U.S. interest rates and dollar strength. Tingas remarked, “The situation is complex, as market forces are pulling in different directions,” advising that Brazil should prioritize strengthening its domestic economy to better weather a potentially negative global outlook.
The Brazilian government remains cautious, anticipating a scheduled conversation between Vice President Geraldo Alckmin and U.S. Commerce Secretary Howard Lutnick, which was postponed but is likely to occur in the following week. Brazilian exporters are closely monitoring a recent executive order from the U.S. that initiates an investigation into potential higher tariffs on wood products, a move justified by national security considerations.
Although wood products do not constitute Brazil’s top exports, the U.S. and Europe remain critical markets for Brazilian furniture and forestry products. Welber Barral, former Brazilian foreign trade secretary, stated that these tariffs could impose challenges on Brazilian competitiveness in the U.S. market, leading to potential tariffs or quotas depending on the investigation’s outcome.
The inquiry into U.S. lumber tariffs could take as long as 270 days. Vale expressed concerns that given Trump’s persistent assertiveness, additional tariffs are likely, and he cautioned that finding alternative markets would not be straightforward amidst a slowdown in both global and Brazilian economies.
In conclusion, while tariffs imposed by the U.S. may not impact Brazil immediately, the longer-term implications could pose significant challenges to its economy. Economic analysts highlight the increased risks of stagflation in both Brazil and the U.S., exacerbated by elevated interest rates and a strong dollar. Brazil’s response involves focusing on strengthening its domestic economy while navigating a complex global trade landscape. Brazil’s exporters are particularly vigilant regarding new U.S. investigations that may lead to increased tariffs on essential products.
Original Source: valorinternational.globo.com
