Brazil's government, led by President Lula, announced a new credit line as the first measure to support sectors affected by the United States' 25% tariff on certain Brazilian products, which officially took effect on July 22. This new line of credit mirrors the 2025 "Brazil Sovereign" program, offering lower costs but requiring participating companies to maintain at least some employment levels. The government is also considering measures such as temporary flexibility in the drawback regime, which exempts or reduces taxes on inputs for exported goods, and other sector-specific changes involving insurance and exemption from the Tax on Financial Operations (IOF) for beneficiaries. However, tax relief for affected companies is not planned for announcement at this time.
The US tariff is estimated to directly impact about 2,400 Brazilian companies, representing roughly 18% of Brazil's exports to the United States, totaling an estimated $7.4 billion based on 2024 trade data. The sectors most affected include wood products, machinery and electrical equipment, furniture, ceramic products, footwear, and sugar. These sectors exported approximately $5.5 billion to the US last year. The Brazilian Machinery and Equipment Industry Association (Abimaq) and the Brazilian Plastics Industry Association (Abiplast) have called for changes to eligibility criteria for credit programs, including removing the employment maintenance requirement, and have urged the government not to retaliate with the Reciprocity Law.
Vice President Geraldo Alckmin emphasized that Brazil does not seek a trade war with the US, but described the tariffs as "unfair," "unwarranted," and "illegal." While direct retaliation using the Reciprocity Law is being explored for future implementation, the immediate focus is on aiding affected domestic industries. The government plans to gather more information from affected industries to finalize further support measures, which are expected to involve smaller credit lines than in 2025 due to a longer list of tariff exemptions this time around. Key Brazilian exports like meat, coffee, oils, and aviation products were exempted from the new tariffs.
The United States remains Brazil's second-largest trading partner after China, and while the tariff hike is not expected to affect Brazil’s macroeconomic stability, the US share of Brazil's exports has reportedly decreased from 12.1% last year to 9.4% in 2026. The Brazilian government's strategy for responding to the tariffs involves financial support for companies, diversification of markets, and ongoing dialogue with productive sectors to assess the full impact on exports, production, and jobs. Goods already in transit by July 22 will be exempt if nationalized in the US by July 29, after which the tariff applies.
