Brazil Scrambles as U.S. Tariff Deadline Looms, Talks Stall

By Luciana Magalhaes, Lisandra Paraguassu, Bernardo Caram, and Ana Mano

SAO PAULO, July 25 (Reuters) – Brazil is scrambling to avert punishing 50% U.S. tariffs in a week’s time, but high level talks are stalled and U.S. companies are reluctant to confront U.S. President Donald Trump over the issue, officials and industry leaders say.

Trump linked the tariffs, which he has said would come into effect on Aug. 1, to Brazil’s treatment of former President Jair Bolsonaro, who is on trial over charges of plotting a coup to stop President Luiz Inacio Lula da Silva from taking office. Lula has called the threatened duty “unacceptable blackmail.”

No new diplomatic talks have occurred since last month, and a Brazilian counter-proposal sent in May went unanswered, two diplomats with knowledge of the matter told Reuters.

Brazilian Vice-President Geraldo Alckmin told reporters on Thursday that he reiterated the country’s willingness to negotiate in a Saturday discussion with U.S. Secretary of Commerce, Howard Lutnick.

The lack of communication has left Brazil with dwindling options as the deadline approaches.

“If he wanted to talk, he would pick up the phone and call me,” Lula said of Trump at an event on Thursday.

The White House didn’t immediately respond to a request for comment.

Negotiations are complicated by U.S. concerns over the prosecution of Bolsonaro, a Trump ally, one diplomat said, calling it a major roadblock.

Trump announced the proposed 50% tariffs on Brazil on July 9 despite a U.S. trade surplus with the country — lining it up for one of the world’s very highest such levies, close to China’s 55% rate.

In a series of 18 meetings, Alckmin has urged representatives from U.S. firms including General Motors GM.N, John Deere DE.N and Alphabet Inc GOOGL.O to press Washington on the issue.

However, the companies are reluctant to confront Trump for fear of retaliation, according to a government official and Ricardo Alban, president of Brazil’s main industry lobby, CNI.

“Things are very tense,” Alban told reporters on Thursday.

Also on Thursday, a group of Democratic senators condemned the tariffs on Brazil as a “clear abuse of power” in a letter to Trump.

The tariffs could have a severe economic impact. The CNI estimates over 100,000 Brazilian jobs could be lost, potentially trimming 0.2% from the country’s gross domestic product. The country’s powerful agribusiness lobby, CNA, projects the value of its U.S. exports could fall by half.

Alban said the potential blow to exporters could be worse than the COVID-19 pandemic, adding that business leaders are asking the government for aid, suggesting new credit lines.

In response, some companies are already adjusting their trade strategies. Motor maker WEG WEGE3.SA is considering a plan to use its plants in Mexico and India to supply the U.S., its chief financial officer told analysts.

Meat exporter Naturafrig Alimentos has begun redirecting shipments to other countries, according to commercial director Fabrizzio Capuci.

Other companies are turning to the courts. Orange juice producer Johanna Foods, for example, has sued the Trump administration over the proposed tariffs.

Companies in sectors ranging from steel to chemicals are also facing export contract cancellations, according to one advisor who asked not to be named.

Abiquim, an association that represents chemical companies in Brazil, confirmed cancellations due to the threat of tariffs, without naming the companies affected. A lobby group representing steel companies declined to comment.

(Reporting by Luciana Novaes Magalhaes and Ana Mano in Sao Paulo and Lisandra Paraguassu and Bernardo Caram in Brasilia, additional reporting by Gabriel Araujo in Sao Paulo and Nandita Bose in Washington, writing by Manuela Andreoni; Editing by Christian Plumb and Philippa Fletcher)