Amid all the chaos and anger in Washington these days, the New York Times reported on Sunday that President Jair Bolsonaro of Brazil said “Mr. Trump decided not to pursue tariffs on Brazilian steel after a phone call on Friday.”
The Times said the development represented a decision to “back off a threat made this month to impose tariffs on Brazilian metal,” a move that would have broken a previous agreement with the country and risked reigniting trade tensions.
The news came in a somewhat unusual way — NYT said that President Bolsonaro “wrote in a post on Facebook Friday that he had spoken with Mr. Trump who decided not to make good on his plan to impose tariffs on our steel/aluminum. Our commercial relations and friendship are getting stronger every day,” he added.
President Trump appeared to confirm Friday night that he would not be pursuing tariffs, writing on Twitter that he had just had a “great call” with Bolsonaro. “We discussed many subjects including Trade. The relationship between the United States and Brazil has never been Stronger!” he said.
President Trump has routinely threatened—and imposed— tariffs to punish trading partners over practices he has deemed unfair to the United States, NYT said. On Dec. 2, President Trump tweeted that he would impose metal tariffs on Brazil and Argentina, accusing the countries of weakening their currencies and hurting American farmers.
“Therefore, effective immediately, I will restore the tariffs on all steel & aluminum that is shipped into the US from those countries,” President Trump said.
The tariffs have not gone into effect. Last week Larry Kudlow, the president’s economic adviser, told The Wall Street Journal CEO Council meeting that the Trump administration might not proceed with the tariffs. “No decisions have been made,” Kudlow said.
The Dec. 2 announcement appeared to surprise Bolsonaro, a populist president who had gone to great lengths to strengthen personal ties with Trump.
“Aluminum?” Bolsonaro asked when reporters presented him with President Trump’s tweet. “If that’s the case, I’ll call Trump. I have an open channel with him.”
That same day, Brazilian authorities started calling the White House, the Commerce Department and the Treasury Department, as well as some lawmakers, to argue that Brazil does not manipulate its exchange rate.
The Brazil Steel Institute said in a statement at the time that it was shocked by the announcement and warned that the decision would hurt the American steel industry which needs semi-finished products exported by Brazil to operate its mills.
It is unclear if Trump has also backed off his threat to impose metal tariffs on Argentina, the Times said.
The United States had initially exempted Brazil and Argentina from the tariffs placed on global steel and aluminum in March 2018, as the countries continued to negotiate over trade terms. In May 2018, the United States announced that it had reached an agreement with both countries that would cap their metal shipments at a specific volume each year.
Trump and his advisers have lamented the negative effects of a strong dollar which makes American goods more expensive to purchase overseas. Administration officials have accused a wide range of governments of manipulating their currencies, including China and the European Union.
The Treasury Department, which issues an official determination on which countries are currency manipulators, has not placed that label on Brazil or Argentina and neither country is on its list of nations that warrant monitoring. The most recent report, which was due in October, has yet to be released. Administration officials have not clarified when it will be published or the reason for the delay.
Economists say that the value of the Brazilian and Argentine currencies have recently fallen, but that the countries are not intentionally devaluing them, despite what President Trump said. Instead, the two governments have actually been selling foreign currency and buying their own money to try to prop up its value.
Still, the falling value of both currencies has made Brazilian and Argentine products cheaper to purchase abroad — especially in China, where the president had been waging a protracted trade war.
As China imposed tariffs on American farm goods like soybeans and halted purchases in retaliation for President Trump’s tariffs, Beijing switched to buying Brazilian and Argentine products instead. That hurt American farmers and rankled Trump. Those tensions have now eased after the announcement last week that China and the United States had reached a Phase 1 trade deal, in which China has committed to buying large amounts of American farm goods.
Brazilian officials have already made some trade concessions to the United States, including improving the terms of trade for wheat and ethanol. Brazil has also agreed to forgo a special status for developing countries at the World Trade Organization, dropped visa requirements for visitors from the United States and granted permission for United States companies to launch satellites from a Brazilian base.
Carlos E. Abijaodi, director of industrial development at Brazil’s National Confederation of Industry, said he believed tariffs would not be imposed and that the threat mainly served as a signal to administration supporters in the upcoming election.
So, we will see. This trade decision, if it holds, likely will be welcomed by U.S. farm equipment manufacturers and others. Clearly, decisions that support free-market relationships are important to producers and should be watched closely as political fights multiply, Washington Insider believes.
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