The duties took effect on July 22 following a year-long investigation under Section 301 of the Trade Act of 1974. The measure covers products including farm machinery, footwear, textiles, wood products, chemicals and ethanol, while excluding several imports considered important to US consumers and manufacturers.
Coffee, beef, energy products, aircraft, aircraft components, rare-earth materials and goods already covered by national-security tariffs were among the exemptions. The carve-outs limited the immediate effect on some of Brazil’s largest exporters and reduced the risk of sharp price increases for US households.
The tariff could affect between $7 billion and $11 billion of annual Brazilian exports, representing roughly 18% to 26% of the country’s shipments to the US. The precise value will depend on customs classifications, exemptions and whether exporters redirect goods to other markets.
Washington said Brazil had adopted policies that burdened or restricted US commerce. The investigation examined the country’s digital trade rules, electronic payment services, preferential tariffs, anti-corruption enforcement, intellectual property safeguards, ethanol market access and measures against illegal deforestation.
Brazil has rejected several of the findings. Officials argue that Pix, the central bank-operated instant payment platform cited in the investigation, is open to financial institutions and has expanded competition rather than discriminated against US companies. Pix has become a central part of Brazil’s payments system, processing billions of transactions each month.
The dispute also covers ethanol. Brazil applies import barriers intended partly to protect its sugarcane-based fuel industry, while US producers rely mainly on corn. Washington has sought wider access for US ethanol, arguing that the existing arrangements place its suppliers at a disadvantage.
President Luiz Inácio Lula da Silva’s government has prepared possible countermeasures under Brazil’s economic reciprocity legislation. That framework allows authorities to suspend trade concessions, investment benefits or intellectual property protections when another country introduces measures judged harmful to Brazilian interests.
Brasília has nevertheless left the door open to negotiations. Officials are seeking additional exclusions and clarification about how the duties will apply to goods already in transit, long-term contracts and products containing components from several countries.
The tariff poses an immediate challenge for labour-intensive industries. Footwear manufacturers in production centres such as Franca, in São Paulo state, depend heavily on US buyers and operate on narrow margins. Companies may have to absorb part of the duty, raise prices, cut production or seek customers elsewhere.
Wood processors, clothing manufacturers and machinery exporters face similar pressure. Smaller businesses are considered particularly vulnerable because they have less capacity to reorganise supply chains or establish distribution networks in new markets.
The exemptions have protected sectors with greater political and economic influence. Brazil supplies about a third of the coffee consumed in the US, making a tariff potentially costly for American roasters, retailers and consumers. The country is also a major beef supplier and home to Embraer, whose aircraft and components are widely used by US airlines and aviation businesses.
Trade data complicate Washington’s argument that the action is needed to correct an unbalanced commercial relationship. The US has generally recorded a goods trade surplus with Brazil, unlike its persistent deficits with several other major partners.
The decision marks the first major country-specific action under the administration’s renewed reliance on Section 301. The provision gives the US trade representative authority to investigate foreign practices and impose remedies after determining that those policies unfairly restrict American commerce.
That legal route has gained importance after broader tariff measures faced court challenges. Section 301 requires investigations, public consultation and formal findings, making the process slower but potentially more resistant to judicial scrutiny.
Brazil’s exposure increased further on July 24 when Washington introduced an additional 12.5% levy tied to concerns over the enforcement of restrictions on products made with forced labour. Goods subject to both actions could therefore face combined duties of 37.5%.
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