US 25% Tariffs on Brazil Risk Becoming an Election Gift to Lula

July 16 (Bloomberg) — The US decision to hit Brazil with 25% tariffs renews a trade fight with President Luiz Inacio Lula da Silva’s government just months ahead of elections, potentially influencing the outcome of a highly polarized race.

While the Trump administration cited unfair trade practices for imposing tariffs on certain Brazilian goods from July 22, the impact may end up political with presidential elections due in October.

Lula, as Brazil’s president is known, has successfully rallied public opinion behind him when faced with earlier US trade pressure. He is set to face off with right-wing Senator Flavio Bolsonaro, who flew to the US earlier this month to testify against the trade penalties then under consideration, saying they’d only help the leftist leader’s re-election bid.

“The proposed tariffs would reward the very offenders they are meant to punish,” Bolsonaro wrote in his submission to the Office of the US Trade Representative.

Those appeals from the son of former President Jair Bolsonaro, an ally of Donald Trump, appear to have been set aside during the US investigation. Brazilian business groups have already started criticizing the measure, warning it could deal a significant blow to the country’s exporters.

The yearlong inquiry “found a number of Brazil’s practices to be unreasonable and discriminatory, restricting the competitive position of American farmers, workers, innovators, and exporters,” the Office of the US Trade Representative said in a post on X late Wednesday.

US Trade Representative Jamieson Greer said the action was necessary “to address these unfair trade practices to ensure American workers and companies can compete on a level playing field.” The US remains open to negotiations to address the issues identified, he said in a statement.

Imports of coffee, beef, and certain ethanol products would be exempt from the new duties, a senior administration official told reporters ahead of the announcement. Ethanol would be subject to the new tariffs, however.

While exempting key Brazilian exports potentially limits the fallout for Latin America’s largest economy, the politics look harder to set aside.

Lula’s poll ratings rose after he cast US pressure as an attack on Brazil’s sovereignty, and he’s now been gifted a potent line of attack against his opponent, whose father sat at the center of Trump’s initial efforts to hammer Brazil with trade levies.

Lula’s campaign will revive the strategy it adopted when the tariffs were first announced in early June, instructing its grassroots supporters to use social media to link the tariff hike to Bolsonaro, reinforcing the narrative that he betrayed the country, according to a person involved in the plan.

The campaign plans to center its messaging on the slogan “TariFlávio,” while setting aside, at least for now, the issue of alleged interference in Brazil’s election, the person said, asking not to be name because they were not authorized to discuss campaign strategy publicly.

‘No justification’

Brazil’s government denounced the tariffs and said it would take measures to insulate its economy from their effects. It also said the Bolsonaro family had worked with the US government to enable them.

“There is no justification for unilateral measures against our country,” the government in Brasilia said in a statement. “We will continue to diversify our trade partnerships and open new markets for our products.”

The US administration proposed an additional 25% duty on imports from Brazil in a June 1 report following an investigation pursued under Section 301 of the Trade Act of 1974. The report specifically calls out the central bank’s electronic payments service known as Pix which is used by millions of Brazilians daily.

The US argued that Brazil has “unfairly disadvantaged” American providers of competing electronic payment services by adopting policies that favor Pix, a platform Lula has repeatedly portrayed as a symbol of the country’s technological sovereignty and financial independence.

Brazil said the allegations related to Pix had no merit, and vowed to pursue reciprocal tariffs and relief via the World Trade Organization.

In his submission, Flavio Bolsonaro also defended Pix, describing it as “one of the hallmarks of Jair Bolsonaro’s administration.”

In a post on X, Secretary of State Marco Rubio accused the Brazilian government of not negotiating in good faith. He said Lula’s “economic policies are bad for Americans and bad for Brazilians. For the past year, Lula has put his own ego ahead of making a deal for the welfare of the Brazilian people, and these tariffs are the price for that.”

Flavio Bolsonaro retweeted Rubio’s post.

Last year, Trump imposed 50% tariffs on a broad range of Brazilian goods in an effort to pressure Brazilian authorities over the prosecution of Jair Bolsonaro, who is under house arrest serving a 27-year sentence for attempting a coup following his 2022 election defeat to Lula.

Most of those duties were later rolled back after negotiations between Brasília and Washington, in a diplomatic victory for Lula.

On Monday, a Brazilian Supreme Court justice barred Flávio Bolsonaro from visiting his father for 90 days, effectively preventing any visits until after the first round of October’s election. Justice Alexandre de Moraes — who has previously been targeted by the Trump administration — said Flavio Bolsonaro had abused his visitation rights to help the former president circumvent a court-ordered social media ban.

The stakes are high for both countries. The US is Brazil’s second-largest trading partner and one of the few major economies with which it runs a trade deficit. Brazil imported more than $45 billion of American goods in 2025, an 11% increase from a year earlier, while exports fell nearly 7%, with crude oil accounting for 12.5% of shipments.

Despite the escalating dispute, both governments are still trying to avoid a broader trade conflict. Greer has met repeatedly with Brazil’s Trade Minister Márcio Elias in recent months to seek a resolution. Lula’s government intends to keep negotiating until the last possible moment but has ruled out concessions it considers politically or legally unacceptable, including changes to Pix, according to a person familiar with the talks.