MW Trump's Brazil tariff 'sets a scary precedent' given the U.S. has a trade surplus with the country, economists say

By Victor Reklaitis

But one former Trump official argues the U.S. president's move against Brazil is similar to how he's deployed tariffs against Mexico and the E.U.

Economists have been expressing alarm over U.S. President Donald Trump's plan to hit Brazil with a 50% tariff on Aug. 1 - the largest country-specific levy out of the 22 that Trump has rolled out this week.

Trump said in a letter to Brazilian President Lula da Silva that the high import tax of 50% was due in part to Brazil's treatment of its former president, Trump ally Jair Bolsonaro, who is facing a trial on coup charges.

The American president's letter also cited "unsustainable trade deficits against the United States" - but overall, the U.S. has a trade surplus with Brazil, rather than a trade deficit. That fact, in turn, has set off many economists.

"Proposed Brazilian tariffs of 50% are nonsensical. The U.S. runs a surplus with Brazil," said economist Eric Rosengren, former president of the Federal Reserve Bank of Boston. "The higher tariff will raise coffee prices," is an "odd use of tariffs" and isn't likely to lead to a change in Bolsonaro's trial, Rosengren said in a social-media post.

Related: Prices for coffee and orange juice are jumping after Trump hits Brazil with 50% tariff

"It is completely out of line with all the rest [of the tariffs]. The rest was mostly based on bilateral deficits," said Richard Baldwin, an economics professor at Switzerland's IMD Business School, in a TV interview.

U.S. goods exports to Brazil in 2024 totaled $49.7 billion, while U.S. goods imports from Brazil were $42.3 billion, and the U.S. had a trade surplus with the South American nation in 2023 as well, according to data from the U.S. Trade Representative's office.

As Brazil's da Silva fired back at Trump in a lengthy social-media post, he said that numbers "from the U.S. government itself show a surplus of $410 billion in the trade of goods and services with Brazil over the past 15 years."

The false claim that the U.S. has a trade deficit with Brazil "could have been a 'copy-paste' error if Trump simply used the letters sent to other countries - those against which the U.S. actually does have a trade deficit," said Thierry Wizman, a strategist and economist at Macquarie Group, in a note. He also expressed concern about the letter's broader implications.

"The action against Brazil sets a scary precedent, insofar as it is the first time that Trump's tariffs are intended to influence (ostensibly) a country's internal political and judicial settings," Wizman said. He said most analysts had viewed Brazil as safe from high "reciprocal" tariffs because of the country's trade deficit with the U.S., but those analysts hadn't figured that Trump might invoke other reasons for a steep tariff on Brazil.

On the other hand, one former Trump administration official argued that the U.S. president's move with Brazil is similar to how he's deployed tariffs against Mexico and the European Union.

"Remember back in the early days of this administration, when he went after Mexico because they weren't helping him both with the border and with controlling fentanyl," said Wilbur Ross, who was commerce secretary during Trump's first presidential term. "He's used it with Europe in terms of the contribution of the various E.U. member states to defense budgets.

"So the difference between the last administration of Trump and this one is he is using tariffs much more broadly," Ross said in a Bloomberg TV interview. "He's using the tariffs for achieving what you might call diplomatic or other goals having not much to do with tariffs. So the Bolsonaro thing, defense and all, there are a number of things like that that he's been using tariffs for."

Some tariff moves probably will be challenged in court, but the courts have made rulings in Trump's favor, and that "gives him the confidence to be a bit more expansive," Ross added.

From MarketWatch's archives (May 2025): Pharma, chips, other sectors look set to get hit with new tariffs soon, even as courts wrestle with other Trump levies

In his letter to da Silva, Trump also linked the 50% tariff to what he described as Brazil threatening U.S. companies with "millions of dollars in fines and eviction from the Brazilian social-media market." The parent company of Trump's Truth Social platform $(DJT)$ and video-sharing platform Rumble Inc. (RUM) have both sued a Brazilian judge over alleged censorship, and that same judge shut down the Elon Musk-owned platform X in Brazil for more than a month last year.

Trump said he's ordering an investigation of Brazil over possible unfair trade practices because of "continued attacks on the digital trade activities of American companies, as well as other unfair trading practices."

Da Silva said "freedom of expression must not be confused with aggression or violent practices," and all companies "must comply with Brazilian law in order to operate within our territory."

Trump this week also targeted the BRICS alliance that includes Brazil, Russia, India, China, South Africa and other countries. He wrote Sunday that any country "aligning themselves with the anti-American policies of BRICS, will be charged an ADDITIONAL 10% tariff," but didn't give a time frame.

The S&P 500 stock index SPX finished with a modest gain Thursday, notching a new record close. It's now up slightly for the week, bouncing back from tariff-related concerns.

-Victor Reklaitis

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July 10, 2025 16:31 ET (20:31 GMT)

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