Updates with sourcing, adds context

By Rodrigo Viga Gaier

SAO PAULO, July 9 (Reuters) - Brazilian planemaker Embraer EMBR3.SA is competing to supply Moroccan airline Royal Air Maroc with its aircraft, a source familiar with the negotiations told Reuters on Wednesday.

The African carrier is looking to expand and renew its fleet in three size categories, and Embraer is fighting to tie up an order in the smallest, the source said.

Earlier on Wednesday, local newspaper Folha de S.Paulo reported that Royal Air Maroc was in talks with several suppliers, including Embraer, to purchase up to 200 aircraft.

Embraer's second-generation E2 jet family is being considered by the airline, Folha reported, citing the carrier's CEO.

The E2 line fits just below Boeing and Airbus's best-selling 150-seat-plus market.

Embraer declined a request for comment, while Royal Air Maroc did not immediately respond.

Shares in Embraer rose as much as 2% on the news, though they flipped, closing down 3.6%, after U.S. President Donald Trump announced he was slapping exports from Brazil with a 50% tariffs. The U.S. is Embraer's No. 1 market.

Reuters reported in June that Morocco's flagship airline was also nearing deals with both Boeing BA.N and Airbus AIR.PA to renew its fleet, which is almost entirely comprised of Boeing aircraft.

Royal Air Maroc plans to order dozens of Boeing jets, while also placing a smaller order for 20 A220 jets from Airbus, industry sources told Reuters.

(Reporting by Rodrigo Viga Gaier and Isabel Teles; Writing by Kylie Madry; Editing by Gabriel Araujo and Cynthia Osterman)

((Isabel.Teles@thomsonreuters.com;))