President Donald Trump's decision to impose a 25% tariff on US steel and aluminum imports directly affects Brazil. The country is the second-largest steel exporter to the US, supplying about 18% of the metal produced by its steelmakers.
The effects of this measure, however, remain uncertain. They will depend on the tax's effectiveness and how the market adapts. In Brazil, this decision could lead to falling prices and increased unemployment in the sector, according to experts.
Economist Weslley Cantelmo, president of the Institute of Economics and Planning, recalled that Trump announced a similar tax during his first term as US President from 2017 to 2021. This measure was later revised to include quotas on imports from the USA's main trading partners, including Brazil.
Since returning to the presidency, Trump has also announced measures against imports of Mexican and Canadian products. These measures were postponed after negotiations between officials.
Given these factors, it's advisable to be cautious before forecasting the measure's effects. The tax announced by Trump is set to take effect on March 12.
Global market impact
If Trump's measures are implemented as announced, the US will likely import less steel and aluminum, as foreign metals will become more expensive. "Trump intends to protect national production by raising the price of Brazilian steel in the US market," said Williams Gonçalves, professor of international relations at the State University of Rio de Janeiro (UERJ).
The US is a major buyer of metals, and this decision is likely to impact the global market. Marcos Cordeiro Pires, professor of international political economy at the State University of São Paulo (Unesp), explained that there would be excess steel on the international market if the US measure is implemented. Consequently, steel prices would likely drop, adversely affecting steelmakers.
Diana Chaib, a researcher at the Center for Development and Regional Planning at the School of Economic Sciences of the Federal University of Minas Gerais (Cedeplar/UFMG), noted that even China would not be able to absorb the Brazilian steel that would typically go to the US. "The Chinese economy is increasing its purchases of iron to produce steel. Their demand should fall," she said.
In Brazil
Cantelmo predicts that an extra barrier to national steelmakers would be negative. Jobs could be eliminated with a possible drop in production. The states of Rio de Janeiro and Minas Gerais, steel hubs, would be most affected. However, he ruled out generalized effects on the national economy.
Eric Gil Dantas, an economist at the Brazilian Institute of Political and Social Studies (Ibeps), pointed out that the steel sector employs around 121,000 people in the country, including direct and indirect jobs. It is therefore a labor-intensive sector.
“It will have some impact, but not enough to change the country's Gross Domestic Product [GDP] and employment dynamics,” said Mauricio Weiss, economist and professor at the Federal University of Rio Grande do Sul (UFRGS), pointing out that the steel industry s for 2% of the country's GDP but works mainly to supply the domestic market.
Pedro Faria, an economist at the Federal University of Minas Gerais (UFMG), sees the possibility of some beneficial effects for Brazil. The cheapening of steel, for example, would be positive. “I think that, for Brazil, it might even be good for the local economy to relieve some of the pressure of demand in civil construction and the shipbuilding industry,” said Faria.
In the US
Cantelmo also said that it is necessary to know whether the US will be able to supply its economy with steel that it produces itself. Imports for around 25% of the country's steel demand.
Without it, the price of the metal is likely to rise in the US. This has a widespread impact on inflation in the US, which would be negative for Trump.
Cantelmo also pointed out that if inflation rises there, the basic interest rates of the US economy should also rise. This would have a collateral effect on the Brazilian economy, which would also have to raise its basic interest rate to attract investors.
Today, the Selic rate—Brazil's main interest rate set by the Central Bank, similar to the Federal Reserve's rates in the US—stands at 13.25% per year. The Central Bank's Monetary Policy Committee (Copom) has signaled it may rise to 14.25% in March.
