US President Donald Trump’s latest barrage of tariff announcements has put South American countries on alert.
Trump signed a letter to Brazilian President Luiz Inácio Lula da Silva on Wednesday warning his government that US imports from the country would be hit with a 50% tariff, partly because of the alleged mistreatment of former Brazilian leader Jair Bolsonaro, who is on trial accused of plotting a coup in 2022.
The letter also cites a “very unfair trade relationship” between the two countries.
The missive follows Trump’s revelation that he plans to slap a 50% tariff on all imports of copper, which is the main source of hard currency for Chile and Peru. It follows a similar decision to tax imports of steel and aluminium earlier this year.
Trump also fired off warnings to countries in Asia, Europe and Africa this week that their exports to the US would face higher tariffs starting next month.
The latest escalation could undermine the widely-held view that Latin America may emerge as a potential winner in Trump’s global trade war, after much of the region escaped with the minimum 10% baseline rate during his initial tariff rollout in early April.
HOT WATER
President Lula called an emergency cabinet meeting following the tariff decision, while Brazil’s foreign ministry summoned the US government’s chief of mission.
“It is wrong to allege there is a US trade déficit with Brazil,” the Brazilian presidency said in a statement. “Official US statistics themselves point to a trade surplus in goods and services with Brazil of around $410 billion during the past 15 years (…) So any unilateral measure to increase tariffs will be met according to the Brazilian law on economic reciprocity.”
The US dollar appreciated 1% against the Brazilian real on Wednesday, while the country’s benchmark Ibovespa equity index fell 1.3%.
“It is a very negative surprise,” Ingo Plöger, foreign trade adviser to Sao Paulo industry group FIESP, told LatinFinance. “It is a political decision, not an economic one, as the US has a trade surplus with Brazil.”
In his letter to Lula, Trump slammed the trial of Bolsonaro as “an international disgrace,” adding: “This Trial should not be taking place. It is a Witch Hunt that should end IMMEDIATELY!”
Bolsonaro, a far right populist who led Brazil from 2019 to 2022, is an ally of Trump and was invited to his January 20 inauguration. Brazil’s supreme court barred him from leaving the country, however, due to the charges against him.
In Chile, the world’s biggest copper exporter, President Gabriel Boric responded cautiously to the threat of a 50% tariff on shipments of the metal entering the US, saying that he would await official announcement from the White House.
“We are waiting the official announcement from the United States regarding what will be the policy,” he told reporters on Wednesday. “Does it copper cathodes or not? What are the limits? Is this going to be carried out or not? And based on that, we are going to be able to respond” to what he described as an “important partner and friendly country.”