The United States decided to impose a 25 percent tariff on steel and aluminum imports, which will have a limited impact on Brazil's Gross Domestic Product (GDP), although it could result in losses of around 1.5 billion dollars in exports for the steel sector. Brazil is one of the main steel exporters to the United States, along with Canada and Mexico, and last year it sent approximately five million tons of steel products worth close to 3 billion dollars.
According to a study conducted by the Institute of Applied Economic Research (IPEA), the imposition of tariffs, in effect since this Wednesday, could cause an annual decrease of 2.19 percent in Brazilian production of ferrous metals, an 11.27 percent reduction in exports, and a 1.09 percent drop in imports. This would imply a loss in Brazilian exports equivalent to 1.6 million tons, representing around 1.5 billion dollars, and a decline in production of nearly 700 thousand tons by the year 2025.
The study highlights that despite the significant impact on the sector's exports, the effect would be of low impact in macroeconomic terms, with a GDP decrease of only 0.01 percent and a 0.03 percent reduction in total exports. IPEA mentions that this could lead to a gain in the trade balance of 390 million dollars, due to the reduction in economic activity that would lead to a 0.26 percent decrease in imports.
Fernando Ribeiro, coordinator of International Economic Relations at IPEA and author of the study, points out that negotiation with the United States is vital for Brazil to try to reverse the measure and protect the sector from potential damage. The Brazilian government, for its part, criticized the United States' decision to impose a 25 percent tariff on its steel and aluminum imports, calling it "unjustifiable and incorrect," and stated that it is evaluating ways to counteract its harmful effects before the World Trade Organization (WTO).
Despite the fact that the WTO's dispute resolution mechanisms are practically paralyzed due to obstacles imposed by former President Donald Trump during his first term, the Brazilian government is looking for ways to counteract the effects of this measure considered harmful to its steel and aluminum exports to the United States.
