Last Monday (July 14), TozziniFreire participated in a special event about American President Donald Trump's recent announcement to impose 50% tariffs on Brazilian products exported to the United States, as well as Brazil's possible retaliation. The meeting, held by the British firm Freshfields, brought together experts in international trade and economics to analyze the legal, political, and economic impacts of this measure.
The event was attended by Freshfields' International Trade partners, Nabeel Yousef and Stephanie Brown Cripps, Congressional investigations partner, Andrew Dockham, and TozziniFreire's Tax Law lead partner, Renata Emery, as well as Banco Bradesco's chief economist, Paula Magalhães.
Check out the key takeaways from the discussion:
Current Status of Tariffs on Brazil
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Trump's letter to Brazil on July 9 announced a 50% tariff on all Brazilian products imported into the United States.
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The proposed tariff covers trans-shipped goods but excludes products subject to sectoral tariffs, digital goods, and service offerings.
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In addition to the 50% tariff on Brazil, Trump threatened an additional 10% tariff on BRICS nations, of which Brazil is a member.
Tariff and Trade Deal Expectations
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In the long-term, we expect a higher tariff rate on Brazil than the pre-July 9 tariff rate. Based on the Trump administration's tariff record against other countries, the administration's strategy is to threaten a very high tariff rate before retreating to a moderate tariff rate that feels acceptable in comparison.
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Based on the trade deals in this current administration, a trade deal with Brazil is not expected to eliminate tariffs completely. For example, the latest U.S. trade deals with the UK and Taiwan maintained the baseline 10% tariff.
Tariff Litigation in the U.S.
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Lawsuits against Trump's tariffs are ongoing. Trump cites his tariff powers from the International Emergency Economic Powers Act (IEEEPA). But, use of tariff powers under IEEPA in this manner are unprecedented and Congress did not contemplate this breadth of tariff power under IEEPA.
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Though Congress did not authorize the use tariffs, Congress is not likely to limit President's power because it would be politically unpopular.
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Though U.S. courts have ruled against Trump, tariffs will likely stay in place until the issue goes before the Supreme Court of the United States.
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In any scenario, we expect at least 6+ months of tariffs. If the Supreme Court upholds Trump's use of tariff power as constitutional, we expect tariffs to be used more widely for the rest of Trump's term, ending in 2028.
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If courts strike down the tariffs, companies can expect a refund.
Brazil's Response
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Brazil enacted the “Economic Reciprocity Law” in April 2025, allowing Brazil's Executive Branch to retaliate through (1) imposing commercial duties against goods or services and (2) suspending concessions and other obligations related to intellectual property rights
How should Brazilian companies evaluate their relationships with customers and suppliers?
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Review contracts with suppliers and customers to identify the party that will bear the cost of increased tariffs.
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Review Force Majeure and Material Adverse Effect clauses for insight or leverage in tariff discussions.
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Consider addressing impact of tariffs in future negotiations (Force Majeure clauses, Change in law provisions and the like).
How companies are mitigating the impact of tariffs?
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Investing in production in the US. Non-US companies are considering investment opportunities in the US to on-shore production, which would eliminate tariffs for goods produced in the US and is generally politically aligned with the Trump administration’s “America First” policy.
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Shifting the final stage of production: suppliers shifting the final stage of production from a higher-tariffed nation to a lesser-tariffed nation. Rules of origin allow goods to qualify for a preferential tariff rate of a lesser-tariffed nation if the originating components have been sufficiently transformed in the lesser-tariffed nation.
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Withholding goods from formal entry: Importers do not owe tariffs when goods arrive at a U.S. port. Tariffs are owed when goods formally enter the country. If tariff rates are expected to fall, importers can withhold goods from formal entry until tariff rates fall.
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These forms of “tariff engineering” are legitimate strategies to legally reduce the amount of tariffs paid on goods exported to the US. Tariff engineering is widely employed by large companies. U.S. Customs and Border Protection (CBP) provides guidance on what is lawful and unlawful tariff engineering.
Effect of Tariffs on the Brazilian Economy
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The most impacted Brazilian sectors from tariffs are sectors where a significant portion of demand is from the United States. For example, Brazilian steel and iron ore exporters will be heavily impacted because most of the demand is from the United States.
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The oil sector is expected to avoid the across-the-board 50% tariff, based on the Trump administration's previous trade deals. Canada and Mexico both received tariff exemptions for oil exports in their trade deals with the United States.
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U.S. tariffs on Brazil are not projected to be a major hindrance on Brazil's economic growth, with tariffs projected to reduce growth by 0.3%.
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Tariffs could depreciate the Brazilian Real due to reduced demand for Brazilian goods (reduced demand for Brazilian goods results in reduced demand for the Brazilian Real).
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The Brazilian Central Bank is not expected to raise interest rates in response to tariffs. Interest rates are at a high level (15.0%) currently - high enough to reduce inflation. Banco Bradesco's Senior Economist, Paula Magalhães, expects the Central Bank to begin lowering rates in December 2025.
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