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BRAZIL: HSBC Says US Trade Negotiations Could Benefit Brazil In Long Run

BRAZIL
BulletEM BulletEmerging Market News
  • Rising US tariffs on steel and aluminium brought Brazil into the international trade turmoil, likely the first move of many.
  • This could eventually lead to tit-for-tat dynamics in which Brazil has less leverage. This is because Brazil's commodity-intensive exports to the US face higher international competition compared to the more essential capital and intermediate goods imports from the US to Brazil. In addition, the average level of tariffs faced by US imports is substantially higher than Brazilian imports into the US, which is ultimately the crux of US trade concerns with Brazil.
  • Potential US tariff hikes would impact several categories of Brazilian exports, including coffee, crude oil and animal products. On the flipside, there are only a few products that enter Brazil from the US with low tariffs.
  • HSBC argues that trade negotiations with the US could benefit Brazil if they lead to lower average tariffs in the long run. Indeed, given the high tariff differential, a plausible outcome could be a reduction in Brazil's import tariffs from the US.
  • US exports into the country are essential for local manufacturing and agricultural activities. Thus, lower tariffs would lower production costs for a wide range of sectors, while exposing inefficient industries that long have been protected from international competition.
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  • Rising US tariffs on steel and aluminium brought Brazil into the international trade turmoil, likely the first move of many.
  • This could eventually lead to tit-for-tat dynamics in which Brazil has less leverage. This is because Brazil's commodity-intensive exports to the US face higher international competition compared to the more essential capital and intermediate goods imports from the US to Brazil. In addition, the average level of tariffs faced by US imports is substantially higher than Brazilian imports into the US, which is ultimately the crux of US trade concerns with Brazil.
  • Potential US tariff hikes would impact several categories of Brazilian exports, including coffee, crude oil and animal products. On the flipside, there are only a few products that enter Brazil from the US with low tariffs.
  • HSBC argues that trade negotiations with the US could benefit Brazil if they lead to lower average tariffs in the long run. Indeed, given the high tariff differential, a plausible outcome could be a reduction in Brazil's import tariffs from the US.
  • US exports into the country are essential for local manufacturing and agricultural activities. Thus, lower tariffs would lower production costs for a wide range of sectors, while exposing inefficient industries that long have been protected from international competition.