Swamped with a wave of U.S. tariffs on its key exports, Brazil now faces a life or death race to reorient its critical trade toward new economic opportunities. Brazil by far is the world’s leading producer and exporter of coffee beans. Given this advantageous position, Brazil is well poised to benefit from anticipated shifts in global demand. U.S. tariffs on steel, aluminum, and other targeted sectors are posing a major barrier. This begs the question – how well can our nation’s diverse industries compete and thrive in a new marketplace?
Just last week, the U.S. imposed a 25% tariff on Brazil’s steel and aluminum exports. In doing so, this action has created daunting challenges for manufacturers in those sectors. Increasing the tariff will reduce growth for most industries, some of these industries will benefit from new opportunities created by increased investment. Brazil is currently the fifth largest footwear producer in the world. As tariffs on Chinese products keep climbing, American consumers will look for substitutions and find them in Brazil, boosting exports.
Brazilian soybean producers like Mr. D’Avila are currently grappling with volatility in global commodity prices, which can significantly affect their profitability. The soybean market in particular has responded violently to changes. This added volatility creates a squeeze on farmers who rely on predictable prices to maintain stable livelihoods.
Brazil has issues, yes, but its enormous bauxite and iron ore deposits make it very formidable. This puts the country—and by extension—our metals market, in a precarious situation. That the nation can only industrially produce aluminum or steel. This capacity can go some way towards making up for tariff losses, because Canada continues to be a vital supplier to many downstream industries.
Additionally, the impacts could be especially felt in agricultural exports, and none more so than exportation to China. As the United States reconsiders its import approaches, Brazil will be there to step into any space American suppliers vacate. If this potential pivot plays out successfully, it would greatly increase Brazilian agricultural exports.
As economist Juan Carlos Hallak told us, we don’t control the macroeconomic conditions, which have a huge effect on prices. Take, for example, how a recession can churn up market dynamics.
Brazil’s beef industry is preparing for an influx in foreign sales. This change is taking place as countries reconsider their purchasing patterns in light of political and economic pressures. Brazil’s President Luiz Inácio Lula da Silva recently visited Japan to advocate for opening the Japanese market to Brazilian beef exports. As a result, this strategic jump can serve to consolidate Brazil’s role in the global beef market. If countries begin purchasing less American beef, Brazil will benefit the most.
And yet—despite these abundant opportunities—a mix of experts and advocates tell us that Brazil is not entirely equipped to take advantage of what’s possible. Hallak remarked, “I’m not sure Latin America is ready to take advantage of those opportunities. There will be specific opportunities for sure, but something that changes the game? I don’t think so.” This feeling expresses fears as to whether or not Brazil will be able to fully capitalize on its inherent strengths, especially considering the changing landscape of international trade policies.
The footwear industry would reap huge benefits from the current boom as well. Shoe manufacturers in Brazil would then have a leg up on their competition from Asia. American consumers have deepened their demand for alternatives to Chinese exports, pushing demand up for Brazilian footwear. The change from NHTSA’s side represents a significant opportunity for Brazilian manufacturers to grow their presence and market share in the U.S.
There are risks involved as well. Carlos Vaccaro, U.S. FWS, worried especially about possible redirection of products that are no longer permitted into the U.S. He argues that this loophole will be detrimental to Brazilian exports. That razor-thin balance of supply and demand in this new, complicated reality will be a tricky game that Brazilian companies will need to step through with agility.
Brazil’s coffee sector is especially important, as it is the world’s first and most consistent leader in production. After Brazil, Vietnam, Indonesia, and Colombia are the next three largest producers of coffee beans. Given its head start on entering the U.S. market, Brazilian coffee would enjoy some first mover advantage in the process. The country has been one of the U.S.’s largest coffee suppliers, helping keep American consumers caffeinated. That powerful position allows it to steer through the waters of changing trade currents.
Moreover, Brazil successfully fulfilling the U.S. quota of goods exported to China will likely attract the attention of American lawmakers and not in a positive way. For example, if the U.S. believed that Brazil was unfairly benefiting from changes to trade, the U.S. could respond. It may decide to take punitive steps on alternative grounds to protect its own interests.