Trump's Steel and Aluminum Tariffs Take Effect: What You Need to Know

Starting today, the United States has implemented a 25% tariff on all steel and aluminum imports, a move that is expected to significantly impact Brazil and other trading partners. Despite efforts from the Brazilian government to ease tensions surrounding U.S. protectionism, these new tariffs are poised to create challenges for Brazilian companies in both sectors. Additionally, uncertainty looms over potential retaliatory tariffs, with ethanol specifically mentioned in a White House statement.

Why the Tariffs?

The rationale behind these tariffs aligns with President Trump's "America First" doctrine, which reflects numerous complaints from the American manufacturing sector about how subsidized trade policies in various countries have undermined U.S. manufacturing and jobs. This time, there is a push for tariff reciprocity, as the U.S. perceives more barriers to American products abroad compared to those imposed on imports into the U.S. Furthermore, the strategy aims to diminish China's influence in global trade and weaken the BRIC nations, particularly in light of proposals for a currency that could replace the dollar in trade among these countries.

Are Brazil's Tariffs Excessive?

The question of whether Brazil imposes excessive tariffs on U.S. goods is complex. The average import tariff in Brazil stands at around 12.4%, compared to approximately 4% in developed countries within the OECD and just 2.5% in the U.S. However, Brazil's effective tariff rate, considering special customs regimes, is closer to 2.7%. Notably, 48% of U.S. exports to Brazil enter tariff-free, while another 15% face tariffs below 2%. Yet, specific cases, such as the 18% tariff Brazil imposes on ethanol compared to the U.S. tariff of 2.5%, highlight disparities.

Trade Dynamics Between Brazil and the U.S.

While China has become Brazil's primary trading partner, the U.S. remains a crucial player, especially in high-value Brazilian exports. In 2023, the U.S. was the leading destination for Brazilian industrial goods, with exports totaling $29.9 billion. The U.S. also holds a significant trade surplus with Brazil, amounting to $263.1 billion in goods and services from 2014 to 2023.

Brazil's Steel and Aluminum Exports to the U.S.

In recent years, the U.S. has maintained an average trade surplus of $6 billion with Brazil in the steel sector. The two countries have a trade flow of $7.6 billion in steel-related products, with the U.S. enjoying a $3 billion surplus. In 2024, the U.S. imported 5.6 million tons of steel plates, with 3.4 million tons sourced from Brazil.

When it comes to aluminum, the U.S. relies less on Brazilian imports, with Canada being the primary supplier. However, the U.S. still accounts for 16.8% of Brazil's aluminum exports, which generated $267 million out of a total of $1.5 billion in 2024.

Expected Impacts of the Tariffs

The Brazilian Aluminum Association (Abal) has expressed concerns about the tariffs' effects on the trade balance and the potential for increased competition from other countries seeking to enter the Brazilian market. This influx could lead to market saturation and unfair pricing. The Brazilian Steel Institute has also highlighted the growing threat from predatory pricing practices, particularly from China, urging the Brazilian government to implement stronger trade defense measures.

As these tariffs take effect, the landscape of international trade is set to shift, with potential repercussions for both the U.S. and Brazilian economies. The coming weeks will be crucial as both nations navigate this new chapter in their trade relationship.