Brazil readies 'tough' response to new US tariffs

Brazil’s government has begun finalizing plans for a “tough” response to new U.S. tariffs, according to multiple sources. The measures, which include potential restrictions on U.S. audiovisual companies and the suspension of certain patent protections, are being prepared under Brazil’s reciprocity law. These steps come after the Trump administration imposed a 25% tariff on numerous Brazilian goods earlier this week, citing unfair trade practices. The government convened senior ministers yesterday to outline possible retaliatory actions, with officials indicating that the response would focus on protecting Brazilian economic interests without directly impacting consumer prices. Options under discussion include limiting dividend and royalty payments by U.S.-based audiovisual firms and temporarily halting patent protections for pharmaceuticals and agricultural seeds. These measures aim to target U.S. intellectual property policies and media industries rather than imposing direct import barriers. President Luiz Inácio Lula da Silva has publicly vowed to invoke the reciprocity law if necessary, though specific details remain confidential. At a recent press conference, Vice President Geraldo Alckmin emphasized that the law was not intended as a tool for retaliation, but rather as a means to safeguard Brazil’s national interests. He stated that the decision on how to proceed would be made at an appropriate time, based on the president’s guidance. Finance Minister Dario Durigan confirmed that the government is preparing financial support programs for sectors affected by the U.S. tariffs, set to begin by early August. This includes credit lines and other assistance measures similar to those introduced during the previous round of tariffs under former President Donald Trump. Durigan noted that the current plan would involve fewer public funds compared to past responses, reflecting ongoing efforts to maintain fiscal discipline. The strategy aims to avoid disrupting Brazilian supply chains or triggering inflation, which could result from direct import tariffs. Officials argue that using the reciprocity law offers a more targeted and legally defensible approach. They also stress that Brazil remains open to diplomatic solutions, though they caution against yielding to foreign pressures. U.S. officials have expressed concern that Brazil’s retaliatory actions could lead to a reassessment of their current policies, adding uncertainty for Brazilian exporters. Shipments to the U.S. declined by 13% in the first half of the year, despite an overall rise in Brazil’s total exports by 5.1%. Some businesses are already exploring alternative markets to reduce reliance on the U.S. In addition to internal preparations, Brazil is moving forward with a revived World Trade Organization (WTO) dispute over customs duties for electronic transmissions. A favorable ruling in this case would provide stronger international backing for Brazil’s retaliatory actions, reinforcing its position within global trade frameworks. This step allows Brazil to expedite the formation of a dispute settlement panel, potentially accelerating its legal recourse against U.S. trade policies.