Indian Council of World Affairs

Abstract: President Trump’s decision to impose 50 percent tariffs on Brazilian imports speaks of a larger assertive US foreign policy towards Latin America. While President Lula remains defiant in the light of encroachment upon sovereignty, it remains to be seen if Latin America develops cohesion in dealing with the US. 

Recently tensions have sprung up between Brazil and the US. US President Donald Trump’s decision to unilaterally impose 50 percent tariffs on Brazilian imports, his support for Jair Bolsonaro who is facing trial for an attempted coup, questioning the impartiality of the Brazilian Judiciary, and targeting the PIX payment interface has caused a rift between both countries. In response, President Lula has adopted a defiant stance in defence of Brazil’s sovereignty. 

This has reignited a question of supremacy in the Hemisphere and particularly in Latin America, which the US views strategically essential. Thus, President Trump’s hardline policy of pursuing US strategic interests inevitably leads to friction with its regional partners, which on the other hand have espoused strategic autonomy. The policy of imposing unilateral tariffs, deportations of migrants and other measures stand as testimony to aggressively rebuilding US prevalence in the region. This also shows that diplomacy has touched the nadir in global relations. By linking Brazil’s domestic issues with trade and tariff, the US is simply pursuing a transactional agenda.

Brazil being a dominant power has adopted a proactive foreign policy under President Lula; forging relations with the Global South, hosting the BRICS and the G20 Summit and actively participating in other forums such as the CELAC and the Democracy Forever Summit. Its stance on de-dollarization, strategic autonomy and developing a pan-Latin American vision for prosperity and development along-with its own ambition of augmenting its position brings it within the crosshairs of the US.

Hence, at this juncture there is a clash of interests pointing to a larger question, in the light of Brazil’s defiance will it inspire convergence among other Latin American countries to face the US?

This paper explains the current issues between Brazil and the US and draws out a larger picture of following implications in the Hemisphere.

Explaining the current events

There are three interconnected issues which highlight the rift between Brazil and the US. The decision by the US President to impose 50 percent[i] tariffs on Brazilian imports citing unfair trade practices and trade deficit, probing Brazil’s payment interface, the PIX[ii] and support for former Brazilian President Jair Bolsonaro[iii].

The US has imposed 50 percent tariffs on imports from Brazil from August 2025[iv]. Justification for this is trade deficit[v], to correct trade imbalances and create a level playing field favouring the American economy. In conjunction with the imposition of tariffs, the US has also taken into account Brazil’s payment interface known as the PIX[vi], arguing that it distorts the market, engages in unfair practices and is detrimental to US made payment interfaces such as Visa, Zelle and Mastercard.

These two moves are connected to President Trump’s support for Jair Bolsonaro. In a letter to President Lula on 9^th July 2025[vii], the US President clearly outlined the reasons for going ahead with the imposition of tariffs. It centres on the trial of Jair Bolsonaro[viii], the Brazilian judiciary’s punitive actions against US social media platforms and economic concerns. President Trump considers Bolsonaro as an ally, and has termed the entire trial as a ‘witch hunt’[ix] calling for its end. To up the ante, the US on 17^th July 2025 revoked the visa[x] of Justice Alexandre de Moraes[xi] who is overseeing the trial.

In response, President Lula took a strong stand, declaring Brazil’s non-negotiable sovereignty, the independence of its institutions and the refusal to accept foreign interference. Encouraging nationalist sentiments, President Lula reiterated that Brazil belongs only to Brazilians[xii].  Leveraging a new reciprocity legislation[xiii][xiv], he has pledged retaliatory tariffs, permitting responses such as limiting intellectual property rights, investments, and U.S. imports. He also, contested allegations of trade imbalances and intends to file an appeal with the WTO. Brazil has launched a social media campaign defending PIX, with Lula's government asserting its consolidation[xv] and resistance to external pressure. Brazil also witnessed numerous street protests against the US and there is a wave of support for President Lula. By adopting a strong stance, the Brazilian President seems to be in a mood to counter the US head-on.

A larger Panorama

Reassertion of US interests

While on surface it may seem that such actions are a testimony to President Trump’s ideological inclinations and affinity with Bolsonaro, the reasons go far beyond. It’s a pattern which the US is deploying to maintain its predominance over the hemisphere. The sheer uncertainty surrounding President Trump’s actions is unnerving for the global community, which is yet to devise a collective response, needless to say the growing trust deficit with the President Trump’s administration. Plus, the growing importance of the Global South and a Newly Emerging World Order in which Latin America plays a significant role is an anathema for the US. President Trump is of the opinion that the Biden Presidency allowed Latin America more flexibility in its foreign policy options and its relations with the US was sans quid pro quo[xvi]. For the current US dispensation, unilateral concessions are non-existent. Hence, to rectify he is adopting a confrontational stance, in situations when required. While this may serve domestic optics, it may lead to friction with Latin America.

This can also be gauged by the fact that, President Trump has adopted such hardline approaches with Latin American countries such as Mexico, Panama, Cuba and Colombia. Surprisingly, the stance becomes visibly more amicable with regards to countries such as El Salvador, Paraguay and Argentina which are aligned with US interests.

This underscores the strategic importance for Latin America for the US and while such hardline policies[xvii] may seem to be erratic at a first glance, these are well-calculated decisions akin to a bait. The objective being, to maintain US dominance over the region and offering tough choices, to either align with US interests or face consequences.

In this regard, President Lula’s foreign and domestic policies lead to direct confrontation with the US. Bolstered by some success in the context of the Panama Canal where the US managed to squeeze some concessions and limited China’s role; cowering a regionally dominant Brazil will send a stronger message to other countries in region. Hence, it may be expected that the US will continue to pursue such approaches in Latin America, despite the propensity for confrontation.

Brazil’s dynamics

In the face of imposition of tariffs, Brazil mulls on retaliation, leading to a possible trade war which will impact the economy of both countries. This will also lead to Brazil seeking deeper economic relations with other countries, notably in Asia and Europe. Brazil’s position against such transactional approaches that is markedly defiant reflects its growing and diversifying relations with other countries[xviii]. President Lula can afford to be defiant, perhaps by not cowing down to the US, and by seeking alternatives. This also boosts his political capacity and support base. Hence, Brazil’s position has depth and calculated risks and despite irking the US it may be able to create possibilities for reciprocity.

Besides it’s noteworthy that President Lula enjoys soaring popularity which will be important considering that the country goes to polls in 2026[xix]. As the impasse continues and with President Trump’s unwavering support for Bolsonaro, it may lead to deeper ideological divisions in the Hemisphere and particularly in Brazil where political polarisation has been the norm since the past few years. Even though Bolsonaro has been barred from running for office till 2030, he wields considerable leverage such as a strong support base, capacity to unite conservative factions and endorse candidates. This may become a challenge for the ruling party.

Yielding to US pressure, may be domestically disastrous for President Lula, as it would signal conceding to Bolsonaro.  Perhaps the US would seek a more convenient alternative to current dispensation post 2026 elections in Brazil. Hence, the domestic political dimensions of Brazil are also noteworthy given the polarisation and the US interests.

For Brazil, the current situation is seen as an infringement on its domestic affairs, evoking nationalism and pride. The gambit of clubbing Bolsonaro’s trial with imposition of tariffs and questions on the Judiciary is a strong challenge for a regionally powerful country. Hence, for Brazil, it’s an open challenge to defy and build convergences with other partners both in the region and outside to counter the US.  Keeping Brazil’s regional and global position, and the upcoming elections in 2026, President Lula faces a challenging situation of strategic choices, electoral prospects and keeping Brazil’s prestige, aflame.

An acid test for Latin America

The current developments between Brazil and the US have larger implications for Latin America. The region finds itself in a complicated position vis-à-vis the US, which seeks to reassert its dominance. The uncertainty of the US policies towards the region which has undergone significant changes since the previous administration is unsettling. The events unfolding is an acid test for Latin America in devising a collective response if any, which may be hindered considering the sheer predominance of the US in the region, ideological divisions within Latin America and also because, of certain countries aligning with Washington. Perhaps, Brazil’s President Lula with his established global standing on developing country issues can get others in the region to rally around him to oppose President Trump’s tariffs and his transactional meddling in domestic and regional affairs.

Thus, President Trump’s gambit is aimed at a larger Latin American political audience which may lead to two divergent responses. Latin American countries may accelerate the diversification of their external partnerships, trade and regional alliances in developing a bulwark on a collective level or; may weigh in favour of negotiating with the US based on their independent equations. The second response will be bargaining from a point of disadvantage. It may be possible to witness shifting trade patterns in Latin America and strengthening of the CELAC, UNASUR and Mercosur. Latin American countries may also resort to reinvigorated multilateralism; building cross-regional cooperation with the GCC, APEC and EU. Shifting trade patterns within Latin America, with countries seeking alternative partnerships in way to diversify economic relations away from the US is also on the cards.

However, a strong collective response is not yet showing signs of emergence due to individual relations of countries with the US, ideological gaps and comparative geographical proximity of the US. Hence, a larger dimension arises, whether Brazil will leverage its strategic and economic weight enabling convergence among Latin American countries in countering the US. Besides it needs to be seen if the US factor in the domestic politics of all Latin American countries will be surmounted to arrive at national consensus in each of these countries to rally around Brazil and President Lula in the endeavour.

Conclusion

In the face of an assertive US foreign policy towards Brazil and Latin America at large, the region contemplates on a collective response, which has yet not materialised. Features such as ideological gaps, relations of individual countries with the US, and the ability of the US to leverage its strength in gaining concessions in a few recent cases will be determining factors. While Brazil certainly exhibits a strong position defending its interests, it is expected that President Trump will continue to seek primacy for the US in the Hemisphere and pursue such strong approaches. The policy of weaponisation of tariffs is strictly a transactional approach adopted by the current US administration. Given the dimensions, if counter measures are not adopted then such gambits may become a template even in the future, thus leading to disadvantages and pronounced asymmetry in the world, vis-à-vis the US. In short, Latin America will be the next geopolitical hotspot with contrasting interests and approaches.

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*Dr. Arnab Chakrabarty, Research Fellow, Indian Council of World Affairs, New Delhi.
Disclaimer: The views expressed are personal.

Endnotes

[i] Reuters. (9^th July 2025). Trump imposes 50% tariffs on Brazil after spat with Lula. Accessed 15^th July 2025. https://www.reuters.com/world/americas/trump-says-us-will-charge-brazil-with-50-tariff-2025-07-09/.

[ii] Financial Times. (21^st July 2025). Brazil rallies to defend much-loved payment system from Donal Trump’s attack. Accessed 23^rd July 2025. https://www.ft.com/content/e17e6de1-d863-46f8-bfab-fa8cbfc495f0.

[iii] Reuters. (19^th July 2025). Tensions rise as Lula blasts US over visa sanctions tied to Bolsonaro trial. Accessed 21^st July 2025. https://www.reuters.com/world/americas/tensions-rise-lula-blasts-us-over-visa-sanctions-tied-bolsonaro-trial-2025-07-19/.

[iv] Coffee, bovine meat, fish, ethanol are the most impacted sectors by US tariffs. Sectors such as aircrafts, pig iron, metals, wood pulp, fertilizers, scrap metals and orange juice are relatively exempted.

[v] On the contrary bilateral trade between Brazil and US is US$ 7.4 billion in favour of the US totalling about $92 billion in trade, primarily in aircraft, oil, machinery, and iron.

[vi] PIX has over 150 million users and 60 million businesses by 2025, processing 250.5 million transactions in a single day.

[vii] Los Angeles Times. (20^th July 2025). Trump’s tariff threat bolsters Lula in Brazil, hurst Bolsonaro. Accessed 23^rd July 2025. https://www.latimes.com/world-nation/story/2025-07-20/trumps-tariff-threat-pushes-lulas-popularity-and-worsens-legal-troubles-for-brazils-ex-leader.

[viii] Bolsonaro is already disqualified from running for office again and may be sentenced to 43 years if found guilty.

[ix] Axios. (11^th July 2025). Trump defends global allies against “witch hunts”. Accessed 21^st July 2025. https://www.axios.com/2025/07/11/trump-bolsonaro-witch-hunt-netanyahu-le-pen.

[x] Independent. (20^th July 2025). Rubio revokes visa for Brazilian judge who went after Trump’s buddy Bolsonaro. Accessed 20^th July 2025. https://www.independent.co.uk/news/world/americas/us-politics/marco-rubio-visa-revoke-judge-trump-bolsonaro-brazil-b2792545.html.

[xi] A 56-year-old judicial expert, he served as former Minister of Justice and Public Security apart from holding other portfolios. Justice Moraes was instrumental in taking down several US based social media accounts on the grounds of spreading misinformation and has taken strong measures against Bolsonaro such as freezing assets and ordering him to wear an ankle bracelet and restrictions on the use of social media.

[xii] Agência Brasil. (17^th July 2025). Lula volta a defender a soberania do Brasil Presidente diz que não aceitará imposições de Trump. Accessed 19^th July 2025. https://agenciabrasil.ebc.com.br/politica/noticia/2025-07/lula-volta-defender-soberania-do-brasil.

[xiii] Lei do Reciprocidade Econômica or the Economic Reciprocity Law was passed on 15^th July 2025 allowing Brazil to impose reciprocal tariffs on other countries in retaliation.

[xiv] Senado notícias. (15th July 2025). Governo regulamenta Lei da Reciprocidade Econômica. Accessed 24th July 2025. https://www12.senado.leg.br/noticias/audios/2025/07/governo-regulamenta-lei-da-reciprocidade-economica.

[xv] Agência gov. (9^th July 2025). Lula: 'Soberania, respeito e defesa do povo brasileiro orientam nossa relação com o mundo'. Accessed 18^th July 2025. https://agenciagov.ebc.com.br/noticias/202507/nota-lula-sobre-taxacao-trump.

[xvi] Politcopro. (15^th February 2025).  Trump ditches Biden’s Latin American trade framework.  Accessed 21^st July 2025. https://subscriber.politicopro.com/article/2025/02/trump-ditches-bidens-latin-american-trade-framework-00204539.

[xvii] The conversation. (29^th January 2025).  Trump’s method for repatriating migrants risks undermining US interests in Latin America.  Accessed 21^st July 2025. https://theconversation.com/trumps-method-for-repatriating-migrants-risks-undermining-us-interests-in-latin-america-248396.

[xviii]  Brazil has deepened its relations with India, China, the EU and many other countries. It is in the process of converging a global network of countries facing similar situations. In this regard, on 7^th August 2025, Prime Minister Narendra Modi and President Lula had a telephonic discussion where views on the current crisis were exchanged. Discussions took place on the economic situation pertaining to unilateral tariffs and the need to defend multilateralism and face challenges jointly.

[xix] Swissinfo. (16^th July 2025). La popularidad de Lula sube levemente tras el arancel del 50 % anunciado por Trump.  Accessed 19^th July 2025. https://www.swissinfo.ch/spa/la-popularidad-de-lula-sube-levemente-tras-el-arancel-del-50-%25-anunciado-por-trump/89689853.