Brazil’s Lula Threatens Retaliatory Tariffs Against the U.S. Amid Ongoing Tensions

RIO DE JANEIRO (AP) — In a bold statement on Thursday, Brazilian President Luiz Inácio Lula da Silva warned that he would impose retaliatory tariffs on the United States if President Donald Trump moves forward with plans to increase import taxes by 50%. The proposed tariffs are linked to Brazil’s ongoing criminal trial against former President Jair Bolsonaro.

Reciprocity Law Activation

Lula announced his intention to activate Brazil’s reciprocity law, which was recently approved by Congress, should negotiations with the U.S. fail to resolve the issue amicably. During an interview with TV Record, Lula stated, “If there’s no negotiation, the reciprocity law will be put to work. If he charges 50 (% tariffs) from us, we will charge 50 from them. Respect is good. I like to offer mine and I like to receive it.”

Risk of a Tariff War

The Brazilian leader’s remarks heighten the possibility of a tariff war between Brazil and the United States, reminiscent of the ongoing tensions between the U.S. and China. Trump has previously indicated that he would respond aggressively to any countries that impose tariffs as a form of punishment against the U.S.

Support from Brazilian lawmakers has surfaced, with Senate President Davi Alcolumbre and Chamber of Deputies Speaker Hugo Motta stating in a joint statement that the reciprocity law equips Brazil “to protect our sovereignty” in this trade dispute.

A New Front in Trade Relations

Trump’s letter to Brazil, posted on social media on Wednesday, criticized the “witch hunt” trial against Bolsonaro and has opened a new front in his trade policy, using tariffs as a means to influence another nation’s domestic politics. Historically, Trump has attempted to leverage tariffs to address issues like fentanyl trafficking and to negotiate economic policies in various countries.

In Bolsonaro’s case, Trump seems to be intervening directly in Brazil’s judicial proceedings, as both leaders face similar allegations regarding their attempts to overturn democratic elections.

Diplomatic Tensions on the Rise

On Thursday, Lula instructed his diplomats to reject any physical delivery of Trump’s letter to the presidential palace in Brasília. The document denounced Brazil’s judiciary and cited recent social media rulings as grounds for increased tariffs starting August 1.

Trade Negotiations in Limbo

The ongoing trade negotiations initiated by Trump amidst earlier tariff implementations have reportedly spiraled into uncertainty. A Brazilian foreign ministry staff member disclosed that discussions previously advancing since April are now “up in the air.”

Analysts suspect that Trump’s tariffs intend to disrupt Brazil’s alliances with other economies in the Southern Hemisphere, particularly following Lula’s remarks at the recent BRICS summit in Rio de Janeiro, where he expressed hope for an alternative currency to the dollar.

A Unifying Force for Brazil

Trump’s interference has inadvertently created a sense of unity within Brazil’s otherwise fragmented political landscape. While some of Bolsonaro’s allies believe Lula’s past actions have escalated tensions with the U.S., there is also a call for prudence in negotiations among other supporters.

The editorial board of Daily O Estado de S. Paulo, typically critical of Lula, acknowledged his response as appropriate, suggesting a shift in public sentiment. Analysts indicate that Trump’s maneuvers may backfire for Bolsonaro, potentially revitalizing support for Lula in the lead-up to elections.

Exceeding Authority?

A recent ruling by the U.S. Court of International Trade found that Trump overstepped his legal bounds by declaring a national emergency to impose tariffs without congressional approval, a decision currently under appeal. Critics, including Democratic Senator Ron Wyden, argue that Trump’s actions prioritize personal disputes over national economic interests.

While the Trump administration claims that tariffs are manageable in the context of a declining inflation rate, many businesses are bracing for the implications of these taxes, raising questions about potential economic sustainability.

In Brazil, the ramifications of Trump’s focus on Bolsonaro’s trial are expected to loom large over the proceedings. Media outlets have suggested concerns that Bolsonaro may consider fleeing to the U.S. if convicted. In a nod to this political turmoil, Eduardo Bolsonaro, the former president’s son, has publicly expressed gratitude towards Trump for his support.

In closing, Lula emphasized that the responsibility lies with Bolsonaro for leveraging Trump’s tariffs against Brazil. He remarked, “His son went there to make up Trump’s mind, then he (Trump) writes a letter to speak about a case that is in the hands of the Supreme Court. A case that is not a political trial. What is under investigation is the evidence of the case.”