Brazil enacts new trade retaliation rules amid global tensions

Brazil has officially enacted new trade retaliation rules, granting the government legal authority to respond to unilateral trade barriers. The decree, signed by President Luiz Inácio Lula da Silva and published on July 15 in the Diário Oficial da União, the country’s official gazette, comes amid escalating trade tensions with the US.

The decree implements Brazil’s Reciprocity Law, approved earlier this year, which allows the government to suspend commercial concessions, restrict investments, and review intellectual property obligations in response to foreign protectionism.

The timing follows a major escalation from Washington after US President Donald Trump announced last week a sweeping 50% tariff on all Brazilian exports, set to take effect on Aug. 1.

While the Brazilian decree does not explicitly name the US, officials in Brasília have made clear that the regulation is a direct response to Trump’s latest offensive. The law empowers Brazil to retaliate proportionally using trade restrictions and regulatory tools.

According to the decree, Brazil will first engage in diplomatic consultations, led by the Ministry of Foreign Affairs, before applying any sanctions. If talks fail, the government may proceed with import restrictions and other penalties.

A newly formed Interministerial Committee on Economic and Trade Countermeasures, chaired by Vice President and Industry Minister Geraldo Alckmin, convened for the first time on July 14 with leaders from industry, agribusiness, and trade groups.

Trade tensions on the rise

Trump’s decision to impose across-the-board tariffs blindsided Brazilian authorities. Until recently, most US tariffs targeted specific sectors—especially steel and aluminum. The sudden jump to 50% on all Brazilian exports marks a significant escalation.

Brazil is a top 10 trading partner for the US, with deeply intertwined supply chains between the two economies. With both governments under mounting pressure—from domestic industries and international allies—the path forward remains uncertain.

Brazil’s newly established legal framework means the country is no longer limited to protests and diplomacy alone. Retaliation, if necessary, can now be enforced by law.

US business leaders join the chorus of concern

In a show of cross-border business unity, the US Chamber of Commerce—the world’s largest business federation—and the American Chamber of Commerce in Brazil, or AmCham Brasil, released a joint statement opposing the proposed tariffs.

“The US Chamber and AmCham Brazil urge both the US and Brazilian governments to engage in high-level negotiations to avoid the implementation of damaging tariffs,” the statement said. “Imposing such measures in response to broader political tensions risks inflicting real harm on one of America’s most important economic relationships and sets a troubling precedent.”

The organizations highlighted that more than 6,500 US small businesses rely on Brazilian imports, and 3,900 US companies invest in Brazil. With nearly $60 billion in US exports flowing to Brazil annually, they warned that the tariffs would disrupt critical supply chains and raise costs for American consumers.

“The proposed 50% tariff would impact products essential to US supply chains and consumers, raising costs for households and reducing the competitiveness of key US industries,” the statement added.

Finally, the US Chamber and AmCham Brazil called for a “negotiated, pragmatic, and constructive solution—one that avoids escalation and ensures continued, mutually beneficial trade.”

Ethanol industry: a key sector in the tariff dispute

President Trump explicitly cited ethanol as an example of unequal trade treatment when announcing the 50% tariff on Brazilian imports. Although the announcement rattled markets, analysts suggest the practical impact on Brazil’s ethanol sector may be limited.

Major publicly listed biofuel companies such as Raízen, BP Bioenergy, and São Martinho are expected to face only a marginal impact due to declining export volumes and sustained domestic demand.

The US share of Brazilian ethanol exports has fallen from nearly 72% in 2017 to just 17% in 2024. South Korea remains a key destination, while recent agreements to open the Chinese market could offer strategic growth opportunities, despite logistical and regulatory hurdles.

Nevertheless, the broader concern lies in possible retaliations or policy shifts that could limit access to strategic markets, including for advanced biofuels and sustainable aviation fuels.

For now, the ethanol sector is navigating the tariff storm cautiously but without alarm.

Tags: Brazil, USA, biofuel