Brazil Unveils Multibillion-Dollar Package To Soften Blow From Trump’s 50% Tariff On Local Industry

Currently, Brazil's top exports to the U.S. are mineral fuels and oils, iron and steel, machinery including parts for aircraft and nuclear reactors, and coffee and spices.

The Brazilian government announced on Wednesday a multi-billion-dollar package to support local companies and exporters affected by the U.S. tariffs.

The package, dubbed "Sovereign Brazil," offers a credit lifeline of 30 billion reais ($5.5 billion). Other measures include postponing tax charges for companies affected by the tariffs, tax credits to small and medium-sized companies, and insurance against cancelled orders.

The plan also incentivizes public purchases of items that could not be exported to the U.S. Brazil has, so far, not announced reciprocal tariffs.

The U.S. has imposed a net rate of 50% on most imports from the country, in part motivated by the prosecution of Donald Trump's ally and Brazil's former President Jair Bolsonaro. Some of the levies come into force later this month, and do not cover exports of items including orange juice, aircraft and their parts, certain machinery, and energy products.

Brazilian President Luiz Inácio Lula da Silva earlier issued a rebuttal, saying that "the interference of the North American government in Brazilian justice is unacceptable."

Currently, Brazil's top exports to the U.S. are mineral fuels and oils, iron and steel, machinery including parts for aircraft and nuclear reactors, and coffee and spices. 

With its rapidly digitizing population of over 200 million, Brazil remains a crucial market for U.S. tech giants, such as Uber, Meta, and Alphabet, while companies like Starbucks and Coca-Cola rely heavily on coffee and raw juice, among other imports, from Brazil.

On Wednesday, Luna said: “We cannot be scared, nervous and anxious when there is a crisis. A crisis is for us to create new things... In this case, what is unpleasant is that the reasons given to impose sanctions against Brazil do not exist.”

Hours later, U.S. Secretary of State Marco Rubio announced new sanctions against at least two Brazilian officials. Like Bolsonaro's allies, Trump has repeated the narrative that the former Brazilian President's prosecution for attempting to overturn his 2022 election loss was unjustified and against the law, and the current government is committing human rights abuses.

So far this year, the iShares MSCI Brazil Small-Cap ETF (EWZS), which provides investors exposure to small-cap companies in Brazil, is up 39%. The retail sentiment for the ETF was ‘bearish’ on Stocktwits, as of the last reading.

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