Trump’s 50% tariff threat may shrink Brazil's economy, hit 120,000 jobs
&imwidth=600&imheight=450&format=webp&quality=medium "Trump’s 50% tariff threat may shrink Brazil's economy, hit 120,000 jobs")
A salesman is seen at his vegetable stand at the supply centre (CEASA) in Brasilia, Brazil. Photograph: (Reuters)
Sao Paulo faces economic distress due to US President Trump's proposed 50% tariff on Brazilian exports, potentially slashing the state's GDP by 2.7% and affecting 120,000 jobs.
Brazil’s most industrialised state is bracing for economic pain. Sao Paulo Governor Tarcisio de Freitas has warned that US President Donald Trump’s proposed 50 per cent tariff on Brazilian exports could cut the state’s GDP by up to 2.7 per cent and threaten around 120,000 jobs. The tariffs, set to kick in on August 1, have sparked concern across sectors, from coffee farmers to aircraft manufacturers, as Brazil’s top exporting state scrambles for damage control.
“What worries me is the possibility of Caterpillar moving its output to another country, the impact on a small coffee producer, the orange industry, Embraer,” Freitas said, speaking at an event hosted by XP Inc. in Sao Paulo, as quoted by Bloomberg.
Emergency support, diplomatic push
Freitas said the state is preparing five-year credit lines to help companies weather the shock. He also confirmed outreach to US lawmakers and companies in an attempt to reduce the fallout before the tariffs take effect. “We’re also reaching out to US lawmakers, US companies, government agents to illustrate the scale of the problem,” he added.
The pressure is mounting as the US prepares to slap a sweeping 50 per cent duty on a broad range of Brazilian goods. According to Bloomberg, the move follows the expiration of a previous trade waiver, giving Trump room to act under national security laws.
States blame Lula’s diplomacy
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The tariff threat has also triggered a political backlash within Brazil. Governors from Parana and Goias, both major exporting regions, joined Freitas in criticising President Luiz Inácio Lula da Silva for failing to negotiate with Washington. “Governors were not consulted by the federal government on these decisions,” said Goias Governor Ronaldo Caiado, as per Bloomberg. Parana Governor Ratinho Junior went a step further, hitting out at Lula’s feud with Trump over the legal case against former President Jair Bolsonaro.
“Bolsonaro is not more important than the trade relationship between Brazil and the US,” he told to Bloomberg. All three governors, Freitas, Caiado and Ratinho — are seen as potential contenders in the 2026 presidential race, making this more than just a trade row. The fallout could shape the political map in the months ahead.
Big blow to Brazil’s exports
Sao Paulo, home to firms like Embraer SA and the Brazilian operations of Caterpillar Inc., is Brazil’s economic engine. Any disruption to its exports, particularly machinery, agriculture, and aircraft risks ripple effects across the national economy. The potential 2.7 per cent GDP loss in Sao Paulo alone would be a major setback. The state contributes nearly a third of Brazil’s GDP and is a key supplier to US markets.
With the August 1 deadline fast approaching, eyes are now on Brasília and Washington to see if diplomacy can dial down the pressure. But for now, Brazil’s industrial heartland is bracing for impact.
(With inputs from the agencies)