New trade war blows are being traded between the US and China. For South America, and for Brazil in particular, it’s a crucial hour that could change the country’s commercial landscape. Brazil is the undisputed king when it comes to producing coffee. Further, it is the 5th largest global producer of footwear, providing the Philippines with many opportunities to take advantage of. The slew of high tariffs on Chinese exports recently created exciting prospects for Brazilian exporters. That’s particularly the case for jobs in agriculture and manufacturing.
Brazil’s agricultural sector could see a significant shift in exports as the nation looks to fill gaps left by U.S. supplies to China. In recent months, Brazil has significantly ramped up its ag exports—especially soy and beef—to the Asian giant. This condition corresponds nicely with China’s desire for stable food supply sources during the current U.S.-China trade war era. The opportunity for Brazil to further increase its agricultural exports to China marks an important relational turn in global trade patterns.
Beyond agriculture, Brazil’s footwear industry is expected to be among the other domestic victors from the Brazilian tariffs slapping such exports out of the Chinese market. Today, China is at the top of the world’s footwear market. With higher tariffs on Chinese products, U.S. retailers will be forced to seek different suppliers. As a result, Brazilian shoemakers would have greater means to export to the United States, thus being able to expand their market share.
Japan is the other major country pivotal to this fast-changing trade landscape. Today, Japan buys 40% of its beef from the United States. Business leaders accompanying Brazilian President Luiz Inácio Lula da Silva during his recent trip to Japan hailed new commercial ties. This creates possibilities for Japan to redirect its increasing meat imports to much more South America. By opening its market to Brazilian beef, Japan could both diversify its sources and deepen Brazil’s export dependence.
South America is rich in natural resources. Brazil is unique in producing all necessary metals and having large reserves of raw materials including bauxite and iron ore. These resources have drawn international attention. Their reality has been overshadowed by the threats of Trump’s steel and aluminum tariffs. Brazilian and Argentine exports of these metals to the U.S. are currently subject to a 25% tariff. This has an enormous impact on their competitiveness in the American market.
One consequence of Trump’s tariff wars have added global commodity price volatility to the economic uncertainty that South American nations now face. Oil prices are down over 60% and copper prices are down nearly half. At the end of March and early April, copper fell to a 17-month low. Eduardo Levy Yeyati, former chief economist, Central Bank of Argentina, was equally frank about the current state of play for the region. He described this as a major “serious headwind” for South America’s economic prospects.
“The prices are affected by macroeconomic factors… for example if there is a recession.” – Juan Carlos Hallak
Trade experts suggest that while there are opportunities on the horizon, Latin America may not be fully prepared to capitalize on them. When it comes to whether the region can capitalize on these opportunities, Hallak was more skeptical.
“I’m not sure Latin America is ready to take advantage of those opportunities. There will be specific opportunities for sure, but something that changes the game? I don’t think so.” – Juan Carlos Hallak
Meanwhile, Uruguay’s new President Yamandú Orsi noted that Trump’s tariffs could be facilitating a closer trade deal between the European Union and Mercosur, South America’s trading bloc. This possible treaty would do even more to allow South American countries to export to the U.S.
With these developments unfolding, the question remains how will Brazil and other South American nations navigate this turbulent trade environment? As they explore new markets and adjust to shifting demands, the region’s ability to adapt will be critical in determining its future economic trajectory.
“If Brazil fills in the US quota of goods exports to China, the US may choose to punish Brazil.” – Eduardo Levy Yeyati
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