Brazilian government officials hit back at US President Donald Trump’s decision to hit the country’s goods with a 50% tariff, declaring it unsustainable and threatening retaliation, as analysts said local multinationals are likely to be the most affected.

The hike in US tariffs from the current 10% rate is an “aggression” that is “unacceptable and inexplicable,” Finance Minister Fernando Haddad said at a press conference on Thursday.

He attributed the move to a political pact between Trump and the former Brazilian President Jair Bolsonaro, who is facing trial in Brazil for his role in alleged coup attempt.

In a letter to Brazil’s current leader, Luiz Inácio Lula da Silva, signed on Wednesday announcing the 50% tariff, Trump declared Bolsonaro the victim of a “witch hunt.”

Still, Haddad said he sees some space for negotiation with the Trump administration.

“It was a bad day, and we will have to find a way to get over it and forget what happened [in order to reestablish] the good relationship between our people, who like each other,” he said.

“We are talking about an unsustainable tariff, either from the economic or the political point of view, at 50%. So I do not believe this situation will stay this way,” Haddad said.

Lula, on the other hand, appeared ready on Thursday to bring the fight to his US counterpart using reciprocal tariffs.

“We may appeal to the WTO. We may launch investigations with other countries asking the US to be coherent. But what matters is that we have a reciprocity law that was approved by Congress,” the Brazilian leader said at a news conference.

COUNTING THE COST

The potential impact on Latin America’s biggest economy is still being assessed.

The US is Brazil’s second-largest trading partner and last year posted a trade surplus with the country of $300 million. Brazil’s exports to the US amounted to $40.3 billion in 2024, while imports from the US reached $40.6 billion.

Should the new tariff rate take effect on August 1, the US effective import tariff on Brazil’s exports will be an estimated 35.5 percentage points, and could potentially reduce its GDP by 0.3 to 0.4 points, said Alberto Ramos, head of Latin America research at Goldman Sachs in a report on Wednesday.

“It is going harm Brazilian multinational companies that have integrated value chains,” Welber Barral, a former trade secretary, told LatinFinance.

Such companies include aircraft manufacturer Embraer, pulp and paper company Suzano, as well as sugar and ethanol producer Jalles Machado, according to a report from XP.

MARKET REACTION

Others in the market seemed to take the news in their stride.

Brazilian clients haven’t been overly concerned in early conversations, said Samy Podlubny, head of debt capital markets at UBS BB, the investment banking partnership between the Swiss bank UBS and Banco do Brasil.

Many firms have “very diversified” export destinations, he said in an interview.

“If you think of the entire economy, there is an impact, but it’s not this earthquake that headlines might make you believe is the case,” Podlubny said, though he added that coffee producers, meat exporters and others in the agricultural sector may be harder hit.

The US dollar gained 0.8% against the real following a 1% rise on Wednesday. The B3 stock exchange’s benchmark Ibovespa index fell 0.54% after a 1.31% drop in the previous session.