OECD Economic Outlook: Brazil Needs Productivity Shift Beyond Commodity Booms
The Organization for Economic Cooperation and Development forecasts Brazil’s economic growth will significantly decelerate due to Donald Trump’s aggressive tariff policies. Brazil’s expansion will slow from 3.4% in 2024 to 2.1% in 2025 and further decline to 1.4% in 2026.
Trump recently imposed a 25% tariff on US steel and aluminum imports, directly impacting Brazil as America’s second-largest steel supplier. Brazilian steelmakers provide approximately 18% of the metal purchased by US manufacturers, creating immediate sectoral vulnerability.
The tariffs will affect Brazil beyond direct trade impacts. Higher US tariffs will likely increase inflation in America, potentially delaying Federal Reserve rate cuts. This situation could weaken the Brazilian real against the dollar, fueling domestic inflation pressures.
Brazilian officials have strategically chosen not to retaliate with counter-tariffs. Foreign Minister Alexandre Padilha explicitly stated Brazil would not engage in a trade war with the United States despite the significant economic implications.
Inflation in Brazil will likely rise to 5.4% in 2025, compared to 4.4% in 2024. This projection exceeds the Central Bank’s target ceiling of 4.5% by a substantial margin. The OECD warns Brazil may need to further increase interest rates to control rising prices.
Brazil Eyes Opportunities Amid Global Trade Shifts
Some economists identify potential opportunities amid these challenges. Brazil might benefit from trade diversion if Chinese products face higher US tariffs. Retaliatory measures from Canada and China against US goods could also create new markets for Brazilian exports.
Brazil’s economic resilience stems partly from its strong labor market. The country has recorded the largest real wage increases among major economies, with wages now significantly above pre-pandemic levels. This wage growth supports household consumption despite tightening monetary conditions.
The OECD emphasizes Brazil must implement ambitious structural reforms to navigate this challenging global trade environment. Maintaining fiscal discipline while enhancing productivity will determine Brazil’s economic trajectory during the growing global protectionist wave.
More: Brazil news in English, every day from The Rio Times.
This article was produced by The Rio Times’ automated newsroom system. How we use AI · Report an error
LatAm Markets: Live Signals → — real-time movers, turnover leaders and FX across Latin America.
Read More from The Rio Times