Earlier this week, Brazil adopted autonomous increases in its applied tariffs on 100 products, more than doubling the tariff rate on a wide range of imports. Effective October 1, 2012, the move increases the applied tariffs on agricultural products, metals, chemicals, tires, footwear, paper, glass and more—to 25 percent ad valorem— and will remain in effect for one year. Brazil is also threatening to increase tariffs on another 100 products in the coming weeks.
Brazil’s Minister for External Relations, Antonio Patriota, has stated that Brazil’s decision to autonomously raise tariffs is in response to the appreciation of its currency, the real, due to financial and industrial bailouts, agricultural subsidies and expansionary monetary policy in developed countries, including the United States. The strengthening of the real has made imports more competitive with domestically produced goods, which has boosted imports, particularly from the United States and from China; from 2007 to 2011, U.S. exports to Brazil have nearly doubled.
The U.S. government has expressed strong opposition to Brazil’s tariff increases. In a letter to Minister Patriota, U.S. Trade Representative Ron Kirk asked Brazil to reconsider the tariff hikes, which he said “will significantly restrict trade from present levels and clearly represent protectionist measures.” Ambassador Kirk continued, “[i]n terms of our bilateral cooperation, I am concerned that repeated, and increasingly U.S.-focused, tariff increases will tarnish perceptions about our mutual cooperation to facilitate in industrial goods,” which represent a major portion of Brazil’s exports to the United States. Minister Patriota responded that any continued U.S. gains in the Brazilian market should take “place in an environment not distorted by exchange rate misalignments and blatant Government support.”
Affected elements of the U.S. business community are mobilizing in opposition to Brazil’s autonomous tariff increases. If you are concerned about the impact of Brazil’s tariff hikes, or their potential expansion to an even broader range of products, please contact an author.