President Trump has announced plans to put tariffs on aluminum and steel imports from Argentina and Brazil. Though increased tariffs were introduced last year, as result of pressure from home and abroad both South American countries had received waivers exempting them.
Trump justified his decision on the claim that the two countries are allegedly engaging in currency devaluation thereby undercutting U.S. food exports. While the two countries have served as alternative sources for imports of soybeans from China, a commodity that has been especially affected due to the ongoing trade war, neither Brazil nor Argentina is in fact devaluing its currency. Rather, their currencies low values are the result of domestic political turmoil. In this year alone, the Brazilian real has fallen by 8 percent against the U.S. dollar while the Argentine peso has fallen by a stunning 37 percent.
The sudden pronouncement did come as a surprise to both countries. Brazil’s President Jair Bolsonaro, who has been called “the Trump of the Tropics,” said that he will meet with Finance Minister Paulo Guedes and attempt to reach out to the White House. As Bolsonaro explained, “I’m going to call [Trump] so that he doesn’t penalize us. Our economy basically comes from commodities, it’s what we’ve got.”
Bolsonaro’s southern neighbor was likewise caught off guard. Argentina’s Production and Labor Minister, Dante Sica, called Trump’s twitter announcement “unexpected” and stated that he has already reached out to the U.S. Embassy in Buenos Aires as well to “all contacts in Washington DC.”
Trump’s actions are likely geared towards his re-election campaign. Both steel production as well as agriculture have been a focus of his, largely due to their significance in swing states and in states that voted for Trump in 2016. According to the American Farm Bureau Federation, farm bankruptcies have increased considerably due to Chinese retaliatory tariffs.
If brought in line with those imposed on other countries, tariffs would be set to rise to 25 percent on steel and 10 percent on aluminum. Though the economic implications are difficult to predict, they are likely to sting, especially for Brazil. The U.S. is Brazil’s biggest market for steel exports: The sector made up nearly 4 percent of the country’s total exports in 2018.
Bolsonaro has been keen to downplay the significance of the imposition of tariffs, claiming that “I don’t see this as retaliation.” This is likely part of a wider attempt to strengthen U.S.-Brazilian ties. During a visit by the Brazilian leader to the U.S. earlier this year, Trump designated Brazil as a non-NATO ally and even suggested that the country could join the military alliance — though this is not possible according to the North Atlantic Treaty. In turn, Brazil has removed visa requirements on U.S. tourists visiting the country.
On the other hand, Argentina is set to have a new president on December 10. The vice presidency will be assumed by Cristina Fernández de Kirchner, who herself served as president and was part of Latin America’s pink tide and critical of U.S. foreign policy towards the region as a whole.