Brazil May See Negative Impact from U.S.-China Trade War

By Lise Alves, Senior Contributing Reporter

RIO DE JANEIRO, BRAZIL – On Thursday the United States began charging a 25 percent import surcharge on 279 Chinese products and now more than 1,000 Chinese products have a surcharge when entering the U.S. This increased U.S. protectionism, however, is not likely to be translated into gains for Brazilian exports, say analysts.

“It’s not even a question of opening the [Brazilian] economy. Brazil does not export more because the Brazilian product is expensive,” Brazilian Exporters Association (AEB) president, Jose Augusto de Castro said, according to government news agency Agencia Brasil.

“Only reforms that reduce the cost of Brazilian goods, such as Social Security, fiscal and political reforms, as well as changes that open space for investments in infrastructure can improve the competitiveness of the country. The challenges are much more internal than external,” added Castro.

In theory, Brazil could take advantage of commercial retaliation to export more manufactured goods to the North American market. However, according to Castro, the low volume of manufactured goods exported by Brazil will not allow the country to take advantage of the Chinese goods surcharge by the U.S. government.

“In terms of manufactured products, our volume is very small. Brazil only has 0.61 percent of the global share of manufactured exports. Brazil is more likely to feel the indirect impact of the U.S. [measure] through commodities,” explained Castro.

This is because a trade war between the world’s two largest economies is likely to reflect on the international prices of commodities, which fall during times of tension.

This would translate into a decrease in the value of exports of large-volume items exported by Brazil, such as iron ores, grains and meats.