President Donald Trump has postponed the implementation of 50% tariffs on Brazilian exports for seven days, while exempting many heavy rates, causing the country’s currency and the actions of some major exporters to value themselves.
The executive order signed on Wednesday stated that tariffs are a response to policies and actions implemented by the Brazilian government that constitute a threat to US national security. He says former President Jair Bolsonaro, who is being tried for his alleged participation in the attempt to blow against President Luiz Inacio Lula da Silva, was the victim of “politically motivated persecution.”
Trump’s decision came with a long list of exceptions, including orange juice and civilian aircraft and parts that benefit Embraer SA. The Brazilian aircraft manufacturer has been working to explain the impact that tariffs would have on its US operations, where it employs more than 2,000 people.
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Real Brasileiro recovered losses of almost 1% and rose up to 0.6% over the dollar, exceeding most emerging pairs after the exemptions were disclosed.
The actions of Brazilian exporters rose as the market evaluated the tariff exemptions. Embraer, seen as the most affected by Trump’s decision, rose up to 11.5% in Sao Paulo, while Weg SA and Suzano SA, who had fallen with previous news, rose more than 1.7% each.
“The market was already pricing the 50%rate, so exemptions are a surprise, which actually dilutes the impact of tariffs,” said Marco Oviedo, senior strategist at XP Investimentos. “In the future, it will depend on the response of the Brazilian government.”
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The exemption list, however, did not extend to other major Brazilian products, pointing to continuous risks to the agricultural giant.
“Food is still a serious problem, because coffee, meat, sleeves and all fruits will have tariffs,” said Welber Barral, former Secretary of Foreign Trade in Brazil.
Trump had initially threatened to implement 50% rates on all Brazilian products on August 1, if the Federal Supreme Court did not immediately suspend the trial against Bolsonaro, which he described as a “witch hunt.”
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Shortly before issuing the updated executive order on Wednesday, the US sanctioned Supreme Minister Alexandre de Moraes, who is overseeing Bolsonaro’s legal cases under the global designation magnitsky. Previously, they had revoked their visa earlier this month.
Despite the increasing US pressure, the Federal Supreme Court of Brazil refused to retreat. Two weeks ago, Moraes ordered Bolsonaro to use an electronic anklet and imposed additional restrictions on social networking, citing obstruction of justice and risk of escape as motivation.
Lula also took advantage of the dispute with Trump, portraying the US president as a threat to Brazilian sovereignty. The leftist leader said he is open to negotiations, but will not accept raids on his country’s affairs.
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After learning of Trump’s new order, Lula called Vice President Geraldo Alckmin, who leads efforts to negotiate an agreement with the US, and other officers to emergency meetings, according to two people familiar with the situation.
Since last week, the Lula government has worked on a contingency plan to mitigate the potential impact of tariffs. With Embraer and excluded orange juice, he sees the situation as less threatening because fewer key sectors will need support, according to a third officer, who, like the others, asked for anonymity to discuss internal issues.
But the government remains cautious, seeing the combination of the tariff order and sanctions against Moraes as part of a broader pressure campaign that can still increase as Bolsonaro’s trial advances, one of the people said.
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