Brazilian chemical sector hit hard as US tariff threat sparks contract cancellations

Brazilian chemical exporters are facing a wave of cancelled contracts and rising uncertainty after US President Donald Trump announced plans to impose a 50 per cent tariff on Brazilian goods starting August 1. The move, which has yet to be reversed or delayed, is already dealing a blow to Brazil’s $2.4 billion chemical export industry to the United States.

Andre Cordeiro, head of Brazil’s chemical industry association Abiquim, told Reuters on July 25 that export orders for several key products, including resins and compounds used in fertilisers, have been abruptly cancelled. One unnamed company lost all its US contracts, while others are facing partial cancellations. In some cases, Brazilian exporters had already arranged financing when buyers pulled out. “Fundamentally, these decisions are being made because the bet is that he (Trump) will actually apply the tariff,” Cordeiro said.

Ripple effects across industries

The fallout is spilling into other sectors that rely on chemicals, including agriculture, manufacturing, and food processing. “No one produces coffee, or even grains, without some kind of chemical product in the process,” said Cordeiro. Brazilian plywood exporters, which use chemicals for bonding, and orange juice producers, reliant on chemical preservatives, are also seeing order cancellations.

Orange juice is a particularly vulnerable export, with 42 per cent of Brazil’s shipments last year going to the US. Braskem and Dow Chemical—both major industry players with operations in Brazil and the US—could also be impacted. Neither company commented on the issue, nor did Exxon Mobil, which operates in Brazil and serves multiple industries. Abiquim maintains that the tariffs are unjustified, noting that Brazil’s chemical sector runs a $7.9 billion trade deficit with the US.

Talks at a standstill, industry fears mount

Efforts to defuse the crisis have stalled. Brazilian diplomats say no new negotiations have occurred since May, when a counterproposal sent to Washington received no response. Vice President Geraldo Alckmin said he reiterated Brazil’s willingness to talk during a recent conversation with US Secretary of Commerce Howard Lutnick, but there has been no follow-up.

President Luiz Inácio Lula da Silva denounced the planned duties as “unacceptable blackmail,” linking the move to Trump’s political support for former President Jair Bolsonaro, who is currently on trial in Brazil. Trump has publicly tied the tariffs to Bolsonaro’s legal troubles.

Industry leaders warn of far-reaching consequences. The National Industry Confederation (CNI) estimates the tariffs could cost Brazil over 100,000 jobs and shave 0.2 per cent off GDP. Some companies are redirecting exports, shifting production to plants in Mexico or India, or even suing the US government.

(With inputs from agencies)