Proposed Tariffs on Brazil Apply to Fewer Categories Than IEEPA Did; Brazil Threatens Retaliation

Peter Harrell, a former National Economic Council supply chain expert in the Biden administration, wrote on X that the list of exempt products is larger than the Brazilian products that Trump exempted under the International Emergency Economic Powers Act, when a combined 50% rate was levied on Brazil.

Kellie Meiman Hock, a former career staffer negotiating with Brazil at USTR, said in a phone interview that under IEEPA, only about 25% of Brazil's exports to the U.S. were hit.

Many of Brazil's top exports to the U.S. last year -- petroleum and coal products, coffee and spices, beef, orange juice, nuts, chemical wood pulp, and aircraft and their parts -- are excluded from the action. Other major categories of exports from Brazil, including $5.4 billion in iron and steel and more than a billion dollars' worth of heavy construction equipment, are exempt because they're covered by Section 232 tariffs.

Harrell wrote that the fact that USTR set the Section 301 rate at 25%, half of the previous 50%, suggests "that USTR might not simply recreate the IEEPA tariff rates with its current 301 investigations into countries' industrial over-capacity and forced labor import practices, but rather set rates that give USTR some negotiating leverage. Conversely, the large number of product exemptions demonstrate that the Administration remains concerned about the potential cost impacts of new tariffs at a time when inflation is already picking up."

Hock, senior counselor at McLarty Associates who specializes in South America, agreed that the carve-outs are because the administration doesn't want to "hit the wallet of the U.S. consumers" when they order an acai bowl, buy a carton of orange juice, or a pound of coffee.

She said the administration's "inclination is to apply those tariffs as broadly as possible," but they've adjusted course as they realize by applying tariffs on industrial inputs, that increases the cost of manufacturing in the U.S.

"It has an impact not just on inflation but also on job creation," she said.

Harrell noted that the USTR found that Brazil was burdening U.S. commerce by its actions or inactions in all six areas of the investigation — digital trade and electronic payments; preferential tariffs; anti-corruption enforcement; IP protection; ethanol market access; and illegal deforestation.

The report complained that Brazil offers preferential treatment to hundreds of Mexican and Indian goods in the agriculture, motor vehicles and parts, minerals, chemicals, and machinery sectors, and says that's allowed because India and Mexico are developing countries (as is Brazil).

It said that Brazil imported $1.8 billion in vehicles and parts from Mexico compared with $1 billion from the U.S., and almost all the Mexican products entered duty-free, while U.S. vehicles and parts were subject to most-favored nation (MFN) rates between 14% and 35%.

The press release announcing the report, which was issued after 11 p.m. ET on June 1, quoted USTR Jamieson Greer as saying that meetings with top Brazilian officials have accelerated in recent weeks, and that President Donald Trump and he had "several constructive meetings." The report listed only two days in April as consultation.

Greer said, "However, we continue to have substantial differences in resolving the issues identified in this investigation. I look forward to continuing engagement with the Brazilian Government in advance of the July 15, 2026, statutory deadline for taking responsive action."

Lula da Silva, who had a positive meeting with Trump last month, issued an indignant statement on X about the report, which, according to an informal translation, said that the Bolsonaro family pushed for the investigation. Da Silva defeated Jair Bolsonaro in the last election; Bolsonaro tried to stop the transfer of power with an uprising and invasion of government buildings by his supporters. He was criminally convicted for those actions.

Da Silva noted that Bolsonaro's son, Flavio Bolsonaro, who serves in Brazil's senate, recently visited the White House.

"It is regrettable that all the dialogue and coordination work carried out by the Brazilian Government, including the personal involvement of Presidents Lula and Trump, is being sabotaged by purely electoral and familial interests," he wrote. He said in that personal meeting, Trump agreed that negotiators could seek a solution that would end the Section 301 investigation without tariffs.

He said there is no justification for tariffs, and noted that U.S. data shows that it sells more to Brazil than vice versa. "Just last year, the U.S. goods trade surplus with Brazil totaled $14.46 billion. Including services, the figure rises to $40.52 billion," he wrote.

"The main effect of these unilateral, politically motivated tariffs imposed on our country has been to inflict damage on the national economy and job and income generation, in addition to diminishing the role of the United States as our trade partner. In the first quarter of 2026, the U.S. share in Brazilian exports reached the lowest value in the historical series at 9.4%," he wrote.

He said he expects there will be no tariffs, and if there are, it may retaliate.

The 25% tariff, and the products it will apply to, is not yet certain. The USTR opened a public comment period June 1 that will last until July 1; there will be a public hearing July 6.

Hock said she expects companies that are benefiting from carve-outs will speak up about wanting to keep them, and that companies that did not make the exemption list will argue for them.

In the first comment period, there were more than 295 comments and rebuttal comments. "Some of these comments were non-responsive or contained irrelevant information. Other comments did not address actionability of any of the specific issues raised in the Notice of Initiation, but requested either specific application or exemptions from tariffs for certain products or categories of products," the USTR said.

The report said that many comments argued that various products, "such as beef, soy, corn, sugar, cotton, coffee, eucalyptus wood and derivative products, Amazonian timber and wood products, Yerba maté, nuts and dried fruits, carnauba wax, and others," either contribute, or don't contribute, to illegal deforestation.

Beef, coffee, teak, mahogany, meranti, lauan, sapelli and Iroko wood, yerba mate, nuts, dried fruits and vegetable waxes were exempted from the action; eucalyptus wood and sugar are not.

"While discrete products and industries might not contribute substantially to illegal deforestation or otherwise make efforts to minimize contributions to illegal deforestation," the report said, Brazil still has a problem with deforestation.

Hock said that Brazil absolutely has efforts to fight deforestation, and acknowledged its efforts aren't perfect. "If you’re going to use 301 as a vehicle to attack countries that don’t have perfect track records on very challenging issues ... that’s an interesting use of the statute," she said.

Hock said that while the administration has adjusted its tariffs, including by lowering tariffs on Section 232 derivative projects like agricultural and construction machinery, most of these adjustments are said to be temporary, and they have been released intermittently.

She said the releases of changes here and there creates an uncertain environment for businesses, which "breeds indecision."