Alckmin's pragmatism counters Lula's bravado in discussions on tariff hikes

President Luiz Inácio Lula da Silva (PT) may be using bravado in his speech against the tariff hike imposed by Donald Trump on Brazil, but what has prevailed is a more pragmatic stance led by the vice-president and minister of Development, Industry, Commerce and Services, Geraldo Alckmin (PSB).

Brazil's priority is not to retaliate, but rather to "resolve" the issue and expand the number of sectors exempt from tariffs. The strategy, which seeks a "win-win" scenario, will be accompanied by a bailout package for exporters, to be announced in the coming days by President Lula.

Alckmin made it clear in São Paulo that raising tariffs is a lose-lose game, as consumers ultimately foot the bill. The vice president called the US tariff "extremely unfair" and "completely weak in its legal framework."

The criticism is based on the significant trade disparity: the average Brazilian tariff on American products is just 2.7%, with eight out of ten US products entering Brazil duty-free. The American tariff could exceed 30% with the tariff hike, according to Itaú.

The sectors already exempt and the battle for the rest

Despite the measure, negotiations are already yielding results. Alckmin highlighted that 45% of Brazilian export sectors have already been excluded from the tariff hike. Among the high-value-added products excluded are aircraft, orange juice, and pulp. The government is focusing its efforts and negotiations on the remaining percentage.

To mitigate the impact on Brazilian companies, President Lula is expected to announce a series of measures. Expectations in the export sector include credit lines with subsidized interest rates, the postponement of federal tax and contribution collections, and the possibility of public purchases of perishable goods.

The relief effort will focus on companies that export the most to the United States and have been most severely affected. The economic team is analyzing each company's situation to determine the measures.

Beyond current negotiations, the Brazilian government has signaled that future bilateral dialogues with the United States may address broader issues. Vice President Alckmin mentioned the regulation of big tech , access to critical minerals, and data center policy as potential points of discussion. This openness demonstrates Brazil's intention to seek a more balanced and comprehensive trade relationship with the United States, which purchases value-added products such as aircraft, auto parts, machinery, and engines.

The motivation behind Trump's tariff hike is not purely economic, but political. The measure is seen as a response to the former US president's fury over the trial of Jair Bolsonaro, his ally, for plotting a coup. Trump has called the proceedings a "witch hunt."

The instrumentalization of trade to interfere in the internal affairs of another country, as in the Brazilian case, reinforces the perception that tariffs are arbitrary and lack a solid legal basis, as Alckmin emphasized: "Regulatory policy cannot be made based on issues of a partisan political nature."

Brazil's non-retaliation stance, focused on negotiation and support for exporters, seeks to circumvent a conflict that could be detrimental to both sides, while also protecting national interests in the face of a measure the government considers unjustified.

The American "cost-benefit" in choosing exceptions to Trump's tariffs for Brazil

Analysts interviewed by Gazeta do Povo point out that the United States also displayed a certain pragmatism when drafting the list of exemptions to the tariff hike: to preserve products essential to its production chains. The 694 exempted items represent 45% of the total value of Brazil's exports to the US in 2024, including petroleum products, chemical wood pulp, raw cast iron, aircraft, and orange juice.

"The decision is neither ideological nor symbolic. It follows the logic of cost-benefit," analyzes Hugo Garbe, a professor at Mackenzie Presbyterian University. "The US has spared products it depends on to keep its economy running. For the rest, the message is direct: 'We need you, for now.'"

Petrobras and Embraer are among the main beneficiaries. The aircraft manufacturer obtained exemptions for specific components, a result of both the United States' dependence on Brazilian parts and the strategic coordination of its CEO, Francisco Gomes Neto. The orange juice sector also maintained privileged access to the American market, given that the US lacks alternative sources of supply to offset Brazilian supply.

The impact of Trump's tariffs on Brazil

A detailed study by the Federation of Industries of Minas Gerais (Fiemg) projects a reduction of R$25.8 billion in Brazilian GDP in the short term (1 to 2 years), the loss of 146,000 formal and informal jobs and a reduction of R$2.74 billion in family income.

In the long term (5 to 10 years), losses could reach R$110 billion, with the elimination of more than 618,000 jobs and a reduction of R$11.56 billion in household income. In addition to the industrial and agricultural sectors, the adverse impacts extend to sectors sensitive to household income, such as real estate, healthcare, sanitation, and construction, reflecting the impact on the consumption of goods and services.