US Initiates Major Trade Probe into Brazil

Action: The Administration announced the initiation of an investigation into Brazil under Section 301 of the Trade Act of 1974, marking a significant escalation in trade tensions between the two countries. The investigation will examine whether certain acts, policies, and trade practices of Brazil are unreasonable or discriminatory and whether they burden or restrict US commerce. The President used a letter to the Brazilian government threatening a 50% tariff beginning August 1 to direct the US Trade Representative (USTR) to initiate the investigation.

Trusted Insights for What's Ahead^®

• USTR will accept public comment on the investigation until August 18. This deadline, along with a public hearing on September 3, implies that the investigation will continue even if the President imposes 50% tariffs on August 1.
• The investigation includes the Brazilian government’s actions related to “digital trade and electronic payment services; unfair, preferential tariffs; anti-corruption interference; intellectual property protection; ethanol market access; and illegal deforestation.” 
• Many of Brazil’s alleged unfair trade practices are longstanding; the US has critiqued digital trade, intellectual property protection, customs administration, and market access restrictions in key sectors including ethanol and wheat. The announcement also targets alleged censorship of political speech and alleged discriminatory enforcement against US platforms.
• The US maintains a trade surplus with Brazil, which was not targeted in the April Liberation Day tariff announcement. Since 2011, the US-Brazil Agreement on Trade and Economic Cooperation has been the primary mechanism for trade and investment negotiations between the two countries, with the most recent updates in 2020 focusing on anticorruption, good regulatory practices, and trade facilitation.
• The President’s letter also pointedly criticizes the Brazilian government for its treatment of former Brazilian President Jair Bolsonaro, who is currently on trial for allegedly attempting a coup in 2022. Current Brazilian President Luis Inácio Lula da Silva responded by arguing against tying the trial to ongoing trade negotiations.
• The President used Section 301 authorities during his first term to impose tariffs against China in 2018. Should this investigation result in a positive determination, the US may impose tariffs, sanctions, and other restrictions to address the issue. If tariffs are imposed, businesses and industry groups will likely actively seek product-specific exemptions and exclusion mechanisms, consistent with prior Section 301 enforcement actions.