US-Brazil Trade Rift Widens As Lula Signals Willingness To Strike Back With Reciprocal Tariffs: Report

Brazil's Foreign Ministry has reportedly instructed the government trade body, Camex, to begin evaluating whether a local reciprocity law could be applied against the United States.

According to a Reuters News report, citing two sources at the ministry, the trade body has 30 days to table a report on the matter. If it approves the use of the reciprocity law, a government working group will likely decide which areas Brazil should target as part of its countermeasures against the U.S.

The move will be in accordance with a law passed in Brazil's Congress earlier this year, which provides a legal framework for the government to respond to potential unilateral trade measures targeting its goods and services, such as the U.S. tariffs. Brazilian President Luiz Inacio Lula da Silva has reportedly authorized the use of the law against the U.S.

Any retaliatory tariffs could put South America's largest economy further at odds with the U.S., its second-largest trading partner. Currently, Brazil faces a tariff rate of 50%, among the highest levies the Trump administration has imposed so far. Brasilia has already moved to the World Trade Organization over the tariffs.

Retail sentiment on Stocktwits about the iShares MSCI Brazil ETF (EWZ) was in the 'bearish' territory at the time of writing.

As per the report, Brazilian officials are expected to inform the U.S. about the start of the process on Friday.

Last month, Trump imposed the steep tariffs on goods from Brazil due to the trial of former President Jair Bolsonaro over plotting a coup, which the Republican President has dubbed a 'witch hunt.' In a letter sent to Lula, Trump also attacked Brazil, claiming that U.S. companies have been victims of unfair trade practices.

However, products such as oranges and Embraer aircraft, among the top exports to the U.S., were exempted. The levies came as a surprise to many, as Brazil is one of the few countries with which the U.S. has a trade surplus.

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