By Luciana Magalhaes
SAO PAULO, July 22 (Reuters) - A new 25% U.S. tariff will hit a range of Brazilian goods on Wednesday, including farm machinery, wood products, ethanol and apparel, escalating tensions in an already strained relationship between the two most populous countries in the Western Hemisphere.
The tariff is the first levied under the Trump administration's new strategy of using the Trade Act of 1974 to investigate what it considers unfair trade practices. The White House's blanket assertion
of emergency powers to levy high tariffs against most global partners was struck down by the U.S. Supreme Court earlier this year.
The new tariff threatens between $7 billion and $11 billion of Brazilian exports to the U.S., according to estimates from Brazil's government and National Confederation of Industry (CNI), respectively. That amounts to roughly 18% to 26% of Brazil's exports to the U.S.
To soften the domestic effect of the tariffs, the U.S. exempted several key imports, including beef, coffee, aircraft and plane parts.
Brazil is the first country hit with a tariff after a year-long Section 301 investigation into unfair trade practices, even though the U.S. has consistently had a trade surplus with Brazil.
"This is the irony of the U.S. measures," said Welber Barral, a former Brazilian foreign trade secretary, noting the bilateral trade balance.
Washington has argued tariffs are necessary to counter what it calls unfair trade practices, from electronic payment services to ethanol market access and illegal deforestation.
The tariffs take effect just two days before a temporary 10% global tariff expires and after a Supreme Court ruling struck down previous 50% U.S. duties on Brazilian goods that forced exporters to seek new markets.
FOOTWEAR LAYOFFS
For many sectors, the adjustments have already been painful.
Brazil's footwear industry, which counts the U.S. as its top foreign market, has already downgraded its export outlook for the year to an expected 7.1% drop, compared with its previous forecast for a 3.6% drop.
The U.S. buys one in every five shoes exported from Brazil, according to the Brazilian Footwear Industries Association (Abicalçados).
"There is no other market capable of replacing the U.S.," said Toni Hajel, owner of exporter TH Shoes and head of the footwear industry union in Franca, a key hub for footwear production in Sao Paulo state.
He said about 40% of the area's exports, or 650,000 pairs a year, are sold to the U.S. The new tariffs will make those sales unviable, he added, forcing producers to lay off workers unless Brazil renegotiates the duties or secures a footwear exemption.
LONG-TERM CONSEQUENCES
Economists warn that the uncertainty created by successive measures and partial exemptions may have consequences well beyond immediate trade losses.
"It undermines confidence," said Gustavo Pessoa, an economics professor at the Fundação Getulio Vargas university in São Paulo, who traveled to Washington this month to argue against the tariffs at a public hearing.
Pessoa said the tariffs would hinder long-term trade relations on both sides: U.S. buyers may fear more Brazilian products will be targeted, while Brazilian exporters may not invest in supply chains geared toward the U.S. market.
U.S. tariffs have already hurt bilateral trade, CNI data show, with Brazilian exports to the U.S. down $2.6 billion, or 13% in the first half of this year from the same period of 2025, driven largely by declines in industrial goods such as iron and steel products, petroleum oils and woodpulp.
Brazil is also part of a separate U.S. investigation into forced labor allegations that ends on July 24, which could add another 12.5% tariff, potentially pushing total duties on some goods to 37.5%.
The outstanding probe has left Brazilian officials in limbo, with Brazilian Trade Minister Marcio Elias Rosa recently saying he had no idea how the penalty will be implemented, even though he expects it to be confirmed.
"We will find out if it will be cumulative or not, whether we will have 25% plus 12.5% or if we will get an exemption," he told reporters in Brasilia.
(Reporting by Luciana MagalhaesEditing by Brad Haynes and David Gaffen)
