STORY-TRÅD·politik

Tariff hike: Reciprocity is not retaliation, says vice-president

Brazil’s decision to resort to its Reciprocity Law should not be interpreted as a retaliatory measure against the US, but rather as a tool to address a situation deemed unfair by the Brazilian government, vice-President Geraldo Alckmin declared on Tuesday (Jul. 21). “The idea is not retaliation. As the saying goes, an eye for an eye may leave both parties blind. What reciprocity means is, we are being treated unfairly, and we want to correct that,” Alckmin stated. Notícias relacionadas:Tariff hike: US builds false narrative around big tech, experts say.Tariff hike: Brazil leads fight against forced labor despite US claims.Tariff hike: Pix system challenges US financial control over Brazil.The vice-president and Minister of Development, Industry, Trade, and Services Márcio Elias Rosa gave an interview following a meeting with business leaders from sectors affected by the new tariffs imposed by the Donald Trump administration. In recent days, several business associations have expressed concern about possible retaliatory measures by Brazil. The vice-president emphasized that the Reciprocity Law was unanimously approved by Congress last year. According to Alckmin, the legislation provides tools for an institutional response, if necessary, while respecting legal procedures such as consultations and public hearings. Three fronts The government has structured its response to the US tariff into three pillars – financial support for companies, market diversification, and ongoing dialogue with the productive sectors to assess the impacts. The US measure imposes a 25 percent tariff on Brazilian products, with the possibility of an additional 12.5 percent, affecting about 18 percent of exports to the US market, equivalent to approximately USD 7.4 billion. Internal support Among the measures under consideration is the provision of credit through the Brasil Soberano (“Sovereign Brazil”) program for working capital and investments by affected businesses. The government is also considering temporarily relaxing rules regarding the drawback system – which provides tax exemptions, suspensions, or refunds for supplies used in the production of goods for export. The idea is to allow exporters who lose market share in the US more time to fulfill their export commitments without losing tax benefits. Another issue under discussion is the possibility of adjusting requirements related to job retention for sectors that may receive emergency support. “The fact that it is unfair, unreasonable, and unwarranted does not mean that the Brazilian government will not take all necessary measures to first assist those in need. The Brazilian government must assess its sectors and take measures capable of, at the very least, mitigating the damage and the cost,” Márcio Elias Rosa stated. New markets At the same time, ApexBrasil, a government agency dedicated to promoting Brazilian exports, will step up its search for new markets for the country’s products. Among the priority markets are India, Mexico, Singapore, Japan, and countries in Southeast Asia, in addition to progress in negotiations on trade agreements between Mercosur and the European Union, Mercosur and the European Free Trade Association (EFTA), and Mercosur and Singapore. The government believes that diversifying export destinations could reduce dependence on the US market, especially for industrial sectors with higher value added. Affected sectors Among the sectors most exposed to the tariffs are: electronics; machinery and equipment; auto parts; footwear; and other industrial products exported to the US. As per official figures, the US market is the main destination for Brazilian exports of electronics. The country accounts for about a quarter of foreign sales in the machinery and equipment sector. Timeline The government is working with a timeline considered critical for defining its response measures. This coming Friday, a decision is expected from the US regarding the possible cumulative imposition of an additional 12.5 percent tariff on Brazilian products due to allegations of forced labor. On July 29, the 25 percent surcharge will take effect for goods already in transit to the US market. By then, the Ministry of Development intends to conclude meetings with representatives from the plastics, machinery, automotive, auto parts, rubber, and footwear sectors to consolidate an assessment of the impacts and define the support package. An official mission to India is also planned to expand trade opportunities, especially for Brazilian manufacturers of machinery and equipment.