A 25% additional tariff imposed by the United States on a range of Brazilian products entered into force on Wednesday 22 July, affecting roughly 20% of Brazil’s exports to the US, according to estimates from the Brazilian Trade and Investment Promotion Agency (Apex-Brasil) and the American Chamber of Commerce for Brazil (Amcham Brasil). The tariff, which covers about 2,300 products including machinery, auto parts, footwear and electronics, is the result of a Section 301 investigation by the Office of the US Trade Representative (USTR) that concluded Brazil had engaged in what Washington called “unfair trade practices” in areas such as digital payments, intellectual property, ethanol market access and illegal deforestation.

In response, the government of President Luiz Inácio Lula da Silva announced the third phase of its “Brasil Soberano” programme, allocating 18.5 billion reais (about $3.66bn) in credit lines for companies affected by the US tariff and by other international trade conflicts. According to a government statement, 13.5 billion reais will come from the Treasury and 5 billion reais from the state development bank BNDES. The funds are intended for working capital, productive investment, technological innovation and market diversification for sectors including steel, aluminium, automobiles, furniture, machinery, wood, paper, plastics, sugar, footwear, fertilisers, critical minerals, and the chemical, pharmaceutical and electronic equipment industries.

Speaking at the launch ceremony, Lula said Brazil would remain at the negotiating table with the United States but would also seek alternative buyers for products hit by the tariff. “We are not going to cry over the product we didn’t sell to them because we are going to look for other buyers,” he said, according to multiple Brazilian media reports. The president added that his government had sent “several documents and proposals” to Washington but had “never found reciprocity in the conversation.” Vice-President Geraldo Alckmin, who had earlier said the priority was negotiation rather than retaliation, described the US tariff as “unjust and totally absurd” — a quote reported by Ámbito Financiero — noting that the bilateral trade balance shows a surplus in favour of the United States.

Lula ruled out immediate retaliatory measures, saying Brazil would focus on expanding its presence in other international markets. He cited the recent Mercosur-European Union trade agreement as an example of how trade barriers could spur diversification. The US tariff exempts about 700 products, including beef, coffee, orange juice and rare earths, which Washington considers essential for its domestic supply chains. A further 12.5% tariff on Brazilian goods is expected later in the week, linked to a separate US investigation into alleged forced labour in supply chains. The Brazilian government rejects the justifications for the tariff, arguing they are politically motivated and do not reflect reality, according to the foreign minister, Mauro Vieira. Apex-Brasil plans to announce a 130-million-real export diversification plan in August, targeting the European Union, ASEAN countries and Central Asian nations.