Brasil: Holding The Trump Card-Lula Is Capitalizing On The Tariff War

Holding the Trump Card: Brazil’s Lula Is Capitalizing on Tariff War Brazil Over July 6-7, Brazil hosted the BRICS summit, an annual gathering of a growing group of major emerging economies increasingly dominated by China and Russia, which are leading a challenge to the US-led Western world order. At the time, commentators said that the president of Brazil, Luiz Inácio Lula da Silva, known as Lula, was unpopular at home, as evidenced by the sharp drop in his administration’s approval ratings to 28 percent, and losing “clout” abroad due to his clumsy handling of foreign policy. “Brazil’s role at the heart of an expanded and more authoritarian-dominated BRICS is part of Lula’s increasingly incoherent foreign policy,” wrote the Economist. “He has made no effort to forge ties with the United States since Donald Trump took office in January.” Instead, it added, Lula courts China, Russia, and Venezuela while defending Iran. Enter US President Donald Trump. On July 9, irked by the BRICS meeting and other issues, Trump threatened Brazil with 50 percent tariffs on its exports to the US – despite the US having a roughly $6 billion trade surplus with the country. He said it was because of the “witch hunt” against former right-wing President Jair Bolsonaro, who is being tried for plotting a coup in the aftermath of the 2022 election that he lost to Lula. Bolsonaro is also accused of plotting to kill both Lula and Supreme Federal Court Justice Alexandre de Moraes. Bolsonaro denies all charges. Soon after, the US began investigating Brazil’s trade practices and revoked the visas of top officials, such as Supreme Court justices, prosecutors, and others linked to Bolsonaro’s prosecution, and announced that it was considering sanctions on these individuals. It has especially singled out de Moraes for his actions against US tech companies in his fight against disinformation, which US Secretary of State Marco Rubio called a “persecution and censorship complex” that not only “violates basic rights of Brazilians, but also extends beyond Brazil’s shores to target Americans.” Lula fought back. He promised to reciprocate on tariffs, saying that any tariff increase by the US would trigger Brazil’s economic reciprocity law. That legislation allows Brazil to suspend bilateral trade, investment, and intellectual property agreements with countries that harm the South American nation’s competitiveness, the Associated Press explained. Lula has also threatened to tax US tech companies, such as Meta. “Doesn’t anyone on (Trump’s) team have the sense to explain to him not to insult another country like that?” Lula fumed, calling the US action “unacceptable blackmail.” “It is unacceptable for foreign interests to override Brazilian sovereignty.” Just a month later, the spat has left the Brazilian president riding high at home and abroad, say analysts. Part of the reason is that Lula is the only leader of a US trade partner to challenge Trump’s new tariff regime despite the consequences. Now, Brazil has become the center of attention worldwide. “The world is watching as Brazil reacts to the US,” wrote Andre Pagliarini of the Louisiana State University in the London School of Economics’ Business Review. “What happens in Brazil going forward is of profound interest to other large economies in the Western Hemisphere, like Mexico and Canada and beyond.” “(Lula) is pushing back hard on the Trumpian notion that the price of market access is the dismantling of democratic norms,” Pagliarini added. “Lula’s overarching strategy is focused on highlighting the irrationality and essential hostility of Trump’s attack… The stakes should be clear for everyone.” Brazil is not alone in being singled out by the US for higher tariffs in response to non-economic policies. For example, Canada’s decision to recognize Palestine led Trump to warn that it would now be “very hard” for America to reach a new trade deal that would allow its northern neighbor to avoid high tariffs. Still, the stakes are higher in Brazil because the US is pressuring the country to subvert its own democratic institutions, analysts say. However, the US pressure has backfired spectacularly. Instead of being cowed, the Brazilian high court has stepped up its action against Bolsonaro, who has also taken pains to distance himself from the US action on his behalf. It ordered the former president to don an electronic ankle monitor, confined him to house arrest at certain times, and forbade him from using social media or talking to foreign officials. It has also seized the assets of his son, lawmaker Eduardo Bolsonaro, who moved to Texas and has been lobbying US officials to get tough on Lula. Meanwhile, Bolsonaro’s allies in Brazil’s right-wing legislature have closed ranks to consider tariffs and other actions against the US. On the streets, Brazilians have rallied, too, protesting US actions and burning effigies of Trump. Lula’s approval ratings have doubled within a month, polls show, and he is now the leading contender in the presidential elections next year. Some say the 2026 vote may echo election outcomes in Canada and Australia earlier this year: Both saw trailing center-left parties come from behind to easily beat Trump-linked conservatives. Moreover, though the tariffs may lower growth slightly in Brazil, its exports to the US only account for about 13 percent of its total exports, while its exports to China are more than double that. Analysts say that will allow Lula to benefit politically, as he will be able to blame Trump and the American president’s allies in the Brazilian right for any economic pain, which in any case will likely fall more heavily on regions that vote conservative. These days, Lula often speaks to Brazilians about the tariffs while wearing a hat that reads, “Brazil belongs to Brazilians.” He also talks often about how sacred Brazil’s democratic institutions are to a society that suffered under their Portuguese rulers and later under multiple dictatorships. “Trump has inadvertently made Lula into a bulwark against neocolonialism,” wrote Foreign Policy, “a role the aging firebrand will be more than happy to play.”