While India is being threatened with 100% tariffs for continuing to purchase Russian oil, Brazil has been once again slapped with 25% levy but with exemptions of imports of certain Brazilian food items. Why? To control its own domestic inflation.      

The timing of imposition of tariffs against Brazil is ominous coming ahead of the country’s Presidential polls in October. The goal is clear. The tariffs are meant to increase political pressure against Brazilian President Luiz Inácio Lula da Silva, who currently has an edge in the elections. The Trump administration has openly exhibited support for Brazil’s ex-President Jair Bolsonaro and his family. 

But here is the interesting twist. The imposition of tariffs just four months ahead of the elections could just have an opposite impact. 

Lula would justifiably use the Trump administration’s move to his advantage.      

Curious Case Of Tariffs On Brazil

The 25% tariff on select imports from Brazil will come into effect from 22 July, following a so-called investigation report highlighting unfair trade practices by the Latin American nation. The tariffs are being imposed under Section 301 of the Trade Act of 1974, which authorises the US government to investigate and respond to foreign trade practices it considers unfair. India is already under the same investigation under Section 301 creating obstacles for the trade deal being negotiated. 

Brazil is one of the leading agricultural exporters in the world and a key supplier of products for global food supply. It is also a key player in the mineral supply chain network. The decision could have major consequences for commodity prices and the farming sector.

“Brazil is a global powerhouse in products such as sugar, soybeans, coffee and beef, while the United States remains one of its largest competitors across several commodity markets. Although products including beef, coffee, aircraft components and some strategic raw materials were exempted from the new tariffs, thousands of other imports-including agricultural machinery, steel and industrial products-will face higher costs. Any disruption in trade patterns could alter global supply chains, influence input costs and create additional volatility in commodity prices and farm income expectations,” a recent article titled ‘U.S. Trade Shock Hits Brazil as New Tariffs Threaten Global Markets’ published in AgroLatam pointed out. 

US Supreme Court & Tariffs 

The US measure comes months after the country’s Supreme Court struck down a separate set of tariffs imposed by the Trump administration under the International Emergency Economic Powers Act (IEEPA). The US Supreme court ruled in February that Trump had overshot his authority by using the law to impose tariffs on important trading partners including India and Brazil.

Last year, the Trump administration had imposed a 50% tariff on Brazil under the IEEPA, under the bizarre pretext of the prosecution of former Brazilian President Bolsonaro, who faces charges linked to alleged efforts to overturn his defeat in the 2022 presidential election.

President Trump’s biases for the ex-Brazilian leader may not yield desired results.  “Leaving aside the separate question of these tariffs backfiring politically in Brazil—likely strengthening the standing of President Luiz Inácio Lula da Silva, whom Trump disdains—the US economic strategy toward Brazil shows the weakness of its leverage in trade policy,” Peterson Institute for International Economics in an article ‘Trump's new tariffs on Brazil reflect the weakness of US trade strategy’ noted.

US Tariffs & Global South 

The highhandedness of Trump’s move “punishing” the Global South has impacted farm and manufacturing sectors. The situation has been further complicated by the ongoing US-Iran war. 

However, the move is now boomeranging. The emerging economies are handling tariffs through tailored and practical strategies. The Global South is increasingly focusing on trade among themselves and reducing dependence on the US dollars by augmenting trade in national currencies. This trend will quietly intensify. 

The Global South is focusing on regional blocs like the African Continental Free Trade Area, ASEAN and Latin American trade bloc besides Eurasian Economic Union to create resilient and alternative supply chains. All eyes will be on the September BRICS Summit under India’s Presidency. 

After G20 presidency will India once again champion the Global South cause and carve out mechanisms to handle global trade disruptions? We’ll have to wait and watch. 

(The writer is a commentator on geopolitics and geoeconomics. Views expressed are personal.)