Brazil May Invoke Reciprocity Law and Turn to WTO Against Trump, Says Lula

President Luiz Inácio Lula da Silva (PT) stated on Thursday (July 10) that the federal government may appeal to the World Trade Organization (WTO) and invoke the Economic Reciprocity Law to respond to the 50% tariff imposed on Brazilian exports to the United States. Behind the scenes, the Brazilian government plans to wait at least until August 1—the date set by U.S. President Donald Trump for the tariff to take effect—to see whether it will actually be enforced. For now, Brazil is studying potential reciprocal responses that would not harm the national economy. One option includes adopting retaliatory measures against the United States in the area of intellectual property, potentially targeting both pharmaceutical patents and rights related to cultural production.

“I don’t make decisions with a 39-degree fever. Brazil will act when the time is right,” Lula said in an interview with Jornal Nacional, emphasizing the possibility of negotiations and taking the case to the WTO. “But if there is no solution, we will apply reciprocity starting August 1.”

The Reciprocity Law, approved in April with support from both the government and opposition during the first wave of tariffs imposed by Trump, makes it easier for Brazil to apply tariffs on imports from other countries and to suspend trade concessions.

In the interview, Lula recalled that the trade balance between the two countries favors the United States. He also said he intends to meet with “all business leaders who export to the United States,” such as orange producers and Embraer, to monitor developments. “I hope business leaders are aligned with the Brazilian government,” he said.

In the letter sent to the Brazilian government announcing the tariff, Trump cited three reasons for the measure: the “witch hunt” against former president Jair Bolsonaro, his ally; alleged “censorship” by the Brazilian Supreme Court (STF) of U.S.-based digital platforms; and an “unfair” trade relationship between the two countries—despite the fact that the U.S. trade balance with Brazil is in its favor.

In an interview on Thursday (July 10), Vice President Geraldo Alckmin linked Trump’s announcement to what he called actions by the “Bolsonaro clan.” According to Alckmin, former President Jair Bolsonaro’s family continues to “work against Brazilian interests and the Brazilian people,” even out of office. “We see that this clan, even out of government, continues to act against Brazil’s interests and against the Brazilian people. Before, it was an attack on democracy—now, it’s an attack on the economy, harming companies and jobs,” said Alckmin.

The vice president reinforced the view that Trump’s announcement is “a major mistake” and should be reversed. He reiterated that Brazil is not a problem for the United States, as it maintains a trade surplus with the country. Alckmin, who also serves as Minister of Development, Industry, Trade and Services (MDIC), said that a decree regulating the Reciprocity Law will be published in the coming days. He noted that Brazil remains open to dialogue and urged patience until the committee to address the matter—created by President Lula—makes progress.

Sources in the Brazilian government do not rule out the possibility that President Trump may backtrack or find a political narrative to cancel the tariff. These sources believe that as the issue becomes more public, Bolsonaro’s image may suffer, which could generate pressure on Trump. One of the strategies being considered behind the scenes, should the U.S. tariff be confirmed, is a response through intellectual property measures.

This approach is based on a past WTO dispute between Brazil and the United States in the 2000s involving cotton production. At the time, Brazil argued that U.S. subsidies to cotton producers violated international trade rules. The WTO ruled in Brazil’s favor, and Brazil chose to retaliate through intellectual property.

This could be a way to avoid damaging sensitive sectors with a “reciprocal” approach. The concern is that economic retaliation could harm imports of essential products for Brazil’s industry and domestic commerce. The issue was discussed in a meeting on Wednesday at the Palácio da Alvorada with President Lula and ministers Rui Costa (Chief of Staff) and Gleisi Hoffmann (Secretariat for Institutional Relations).

Finance Minister Fernando Haddad said Thursday morning that the tariff signaled by Trump “has no economic rationality” and is unsustainable both economically and politically. Haddad emphasized that Brazil’s Foreign Ministry “knows how to negotiate” and that disagreements should be resolved through Brazilian diplomacy. His statements were made during a press interview with Brazil 247, CartaCapital, Diário do Centro do Mundo, Fórum, and TVT News for the Barão Entrevista program.

Later in the day, outside the Finance Ministry headquarters, Haddad noted that there are both non-tariff and tariff measures available that would not impact inflation and could be used as eventual retaliation. However, he stated that they will not necessarily “be triggered.” “Our hope is that by [August 1], this issue will be resolved,” he said.

Another possible consequence of Trump’s decision is a push by the Brazilian government to pursue new free trade agreements. The idea is to leverage Brazil’s pro tempore presidency of Mercosur to attract countries interested in new trade deals, similar to what was done with the European Union.

Brazil has already identified interested partners. The list includes Canada, the United Arab Emirates, South Korea, Mexico, Indonesia, and Vietnam. The government hopes to finalize agreements with the EFTA bloc (Iceland, Liechtenstein, Norway, and Switzerland) by mid-September or October.

Lula is said to have received a positive signal from Canada during a meeting with the country’s prime minister, Mark Carney, at the G7 summit. “Canada was clear in expressing its interest in reducing dependence on the U.S. market and views Mercosur as an ideal partner,” said a source. Brazil, however, rules out using other Mercosur countries to retaliate against Trump, as Argentina’s President Javier Milei is unlikely to support such a stance against the U.S. government.

Source: Valor Econômico

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