USTR Locks In 25% Tariffs on Brazilian Goods, Betting Leverage Will Move Brazil

Duties take effect July 22 with beef, oranges and a modestly expanded list of farm and industrial goods spared; Brazil invokes its reciprocity law and promises a WTO fight as negotiations stall.

The Office of the U.S. Trade Representative (USTR) has finalized its Section 301 action against Brazil, setting 25% tariffs on a broad swath of Brazilian goods effective July 22 and closing out a yearlong investigation into six categories of Brazilian trade practices: digital trade and electronic payment services; unfair, preferential tariffs; anti-corruption enforcement; intellectual property protection; ethanol market access; and illegal deforestation. The Notice of Action largely tracks the framework USTR published June 1, with the agency rejecting most requests to strip products from the exemption list while granting a limited set of additions after weighing more than 360 written submissions and testimony from 77 witnesses at the July 6-7 public hearings. Link for USTR release. 

USTR is not being coy about the point of the exercise. “The imposition of a significant tariff on all products of Brazil, with certain exemptions, is appropriate to create leverage and obtain the removal of those acts, policies, and practices,” the agency said. 

USTR Jamieson Greer framed the action in broader terms: “Safeguarding American economic interests against unfair trade practices is the bedrock of President Trump’s America First policies.”

Exemption list holds, with additions at the margins
 

The final determination keeps the proposed exemption architecture largely intact. Beef, oranges and other listed products stay off the tariff list, as do articles and parts already covered by Section 232 duties on steel, aluminum and other national security tariff lines. USTR did grant new carve-outs for pig iron, organic honey, unflavored instant coffee, iron and steel scrap, aluminum hydroxide, certain animal hides, furskins and leather, additional pharmaceuticals and pharmaceutical ingredients, certain wood products, certain seafood, antiques and art, ash containing precious metals, and used clothing. Moving the other direction, high-purity dissolving pulp and the non-pharmaceutical applications of certain products lost their proposed exemptions and will face the full 25% duty.

The rationale USTR applied is a four-part screen: products stayed exempt only if tariffing them could choke off domestic supply of raw materials, cause economy-wide disruption, target goods that cannot be grown or produced in sufficient quantities at reasonable prices in the United States or sourced elsewhere, or fail to contribute substantially to eliminating the Brazilian practices at issue. The hides and leather additions cleared that bar on comments that comparable supply “at comparable prices, quality, or scale” does not exist outside Brazil and that these are manufacturing inputs feeding automotive, furniture and footwear production — meaning tariffs would “undermine the competitiveness of U.S. firms” rather than pressure Brazil. Seafood made the list on similar logic: commenters cited U.S. catch limits, quotas and spawning-season closures, noted imports supplied about 80% of the seafood Americans ate in 2023, and argued restaurants and retailers depend on products matched to North American consumption patterns. The exempted seafood lines include bigeye tuna, mackerel, swordfish, tilapia, various fresh-water and other fish, and rock lobster.

Beef stays exempt over objections; ethanol industry backs the action

Some commenters pushed USTR to pull beef and similar products off the exemption list, arguing they are “linked to certain acts, policies, and practices found actionable in this investigation” — a reference to the deforestation findings — and that exempting them “would fail to hold Brazil accountable.” USTR declined, citing limited supply outside Brazil, and pointedly noted that Section 301 lets it act against any goods or sector “without regard to whether or not such goods or economic sector were involved in the act, policy, or practice that is the subject of such action.” In other words, the statute does not require the tariff list to mirror the offense list, and with U.S. beef supplies tight, the agency was unwilling to add a tariff that would land mostly on American consumers.

The U.S. ethanol industry, whose market-access grievance is one of the six pillars of the case, endorsed the 25% rate as “an appropriate action” consistent with the investigation’s findings and a way to “recoup the market value” lost to Brazil’s ethanol tariffs. But even supporters flagged a stacking risk: testimony noted that layered atop other pending Section 301 actions, the total applied rate on Brazilian ethanol could reach 37.5% — well above Brazil’s own tariff on U.S. ethanol and a recipe, some warned, for further instability in the ethanol market.

Brazil reacts: reciprocity law activated, WTO challenge promised

Brazil’s response was swift and hot. President Luiz Inácio Lula da Silva said there is “no justification for unilateral measures” against Brazil, cast the action as flowing from Washington’s “active collaboration with the Bolsonaro family,” and pointed to what he called a $424.5 billion cumulative U.S. trade surplus with Brazil over the past 15 years. Lula rejected any suggestion Brazil had negotiated in bad faith, insisting his government “never left the negotiating table.”

More concretely, the government said Brazil “will immediately initiate the procedures to activate the instruments provided for” in its Economic Reciprocity Law and will pursue the matter through WTO dispute settlement. The reciprocity law, passed by Brazil’s Congress in April 2025 and implemented by decree during the earlier tariff confrontation, gives the government a menu that runs well beyond counter-tariffs: suspension of trade concessions, revocation of intellectual property rights and suspension of patent obligations, with an emergency fast track run by an interministerial committee chaired by Vice President Geraldo Alckmin. Brazilian industry, for its part, has urged caution — the National Confederation of Industry pressed the government during the last round to exhaust diplomatic channels before sanctioning Washington, warning of significant job and GDP costs from a spiral.

Analysis: a leverage play on a firmer legal footing

Three things stand out in the final action. 

First, this is now the administration’s legal workhorse against Brazil. The 50% IEEPA-based tariffs imposed in 2025 did not survive the Supreme Court’s February ruling striking down tariffs under that statute, and Section 301 — with its completed investigation, public record and explicit statutory grant — is far harder to challenge in U.S. courts. The yearlong process, the hearings and the carefully reasoned exemption screens all read as an administration building a durable record, not just a headline.

Second, the action is calibrated to hurt Brazil more than U.S. consumers. The exemptions for beef, oranges, coffee lines, pig iron and manufacturing inputs track almost exactly the products where Brazil is the marginal — or only — affordable supplier. The Notice of Action does not put a dollar figure on covered trade, but outside estimates peg the targeted products at roughly $15 billion, and the Peterson Institute for International Economics estimated before the final notice that some 60% of Brazilian goods entering the US would escape the new duties. That is a leverage design: enough pain to matter in Brazil, not enough to show up broadly in U.S. grocery aisles.

Third, the leverage has not worked yet. Talks to date have produced no movement on the underlying practices, Lula faces an election year incentive to stand up to Washington rather than accommodate it, and the reciprocity law gives him politically visible tools — including IP suspension aimed at U.S. pharmaceutical and audiovisual interests — that do not require WTO timelines. The July 22 effective date leaves a narrow window for a de-escalation neither side currently seems to be reaching for. 

Watch whether Brazil’s countermeasures target politically sensitive U.S. exports, whether the ethanol stacking issue gets resolved before compounding, and whether USTR follows through with modifications if Brazil offers concessions — the notice preserves that flexibility, which is, after all, the whole point of leverage.