Brazil: Tariff fallout shapes election dynamics – Standard Chartered

Standard Chartered’s Dan Pan assesses new United States (US) Section 301 tariffs on Brazilian exports, noting a 25% levy effective 22 July that could rise to 37.5%. Pan argues the economic impact on Brazil should be limited by wide-ranging exemptions and diversified trade ties, but warns that the political fallout is significant, potentially strengthening President Lula against Flavio Bolsonaro in the October election.

US tariffs seen as politically potent

"The year-long trade and political feud between the US and Brazil is likely to extend following the ongoing Section 301 tariff investigations."

"In addition to the 25% tariff on Brazil’s exports, which will be effective from 22 July, another pending investigation could bring the final tariff to 37.5%. However, any added impact on Brazil’s exports may be limited, as the final new tariff would still be below the 50% tariff imposed by IEEPA last July on concerns over former President Jair Bolsonaro’s trial."

"With over 30% of exports being exempt from the announced 25% Section 301 tariff, we expect the economic pain to be limited."

"Total exports have continued to grow despite hefty US tariffs, benefiting from favourable terms of trade and deepening trade ties with other major trade partners in Asia and the Middle East."

"Wide-ranging exemptions are likely to limit the economic impact on Brazil, but unlikely to reverse the notable decline in bilateral trade since mid-2025 after the announcement of the 50% IEEPA tariff."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)