Brazil Plans Response as Steel Sector Hit by Chinese Imports and U.S. Tariffs

Brazil’s steel industry is going through one of its most critical periods in decades. The U.S. government’s adoption of surcharges on Brazilian products, combined with a sharp increase in imports of Chinese steel sold at dumping prices, has intensified pressure on companies in the sector and triggered warnings among municipal, state, and federal authorities.

The strategy under evaluation by the federal government calls for raising import tariffs as early as 2026, with a focus on steel from China — currently sold in Brazil with dumping margins of 103%. The measure has a dual purpose: reinforcing protection for domestic steelmakers and generating up to R$14 billion to help close the federal budget.

The fiscal need is immediate. To reach the zero primary deficit target set by the 2025 Budget Guidelines Law (LDO), the government still needs R$27.1 billion in the last quarter of 2025 alone.

Imports surge and pressure Brazilian steelmakers

The flow of Chinese steel into Brazil rose sharply this year. In the first quarter, flat-steel imports increased 42% year-on-year, and some product types recorded a Chinese share of 91.5% of total imports.

Steelmakers estimate that the country will end 2025 with 6.3 million tonnes of imported steel — a record figure that reduces the use of Brazil’s own installed production capacity.

Industry associations such as Aço Brasil say competition with Chinese steel occurs under asymmetric conditions, with subsidies and industrial policies that make price competition impossible. With squeezed margins and lower domestic demand, companies have begun reassessing investments and expansion projects.

The association describes the current situation as an “import surge,” with direct effects on employment, production, and tax revenue — especially in industrial hubs such as southern Rio de Janeiro, home to several of the country’s largest steel plants.

Imagining a more favorable scenario, Brazil’s economic team is evaluating higher import taxes on cars and steel. Both sectors are being hit by a “flood” of Chinese products.

The massive influx of Chinese electric cars into Brazil is transforming the domestic automotive industry, creating fierce competition driven by price and advanced technology. The impact is double: on one hand, it accelerates market electrification; on the other, it pressures established automakers and the government to adapt quickly.

Brands such as BYD and GWM rapidly gained significant market share, with BYD alone holding around 75% of the electric-vehicle (EV) market in Brazil in 2025. This “invasion” has forced traditional automakers to rethink their strategies, including their pricing strategies.

Companies are building or adapting factories in Bahia and São Paulo, representing multibillion-real investments and the creation of thousands of direct and indirect jobs. In contrast, according to recent data, China’s trade surplus in the first 11 months of this year reached US$1 trillion.

In this context, Brazil has become one of the world’s largest markets for Chinese electrified vehicles, surpassing Russia and Belgium. Recently, fearing a similar influx of Asian cars, the United States raised its own EV tariffs to above 100%.

Export decline hits domestic market

The drop in steel exports to the United States has uniquely affected the domestic industry, where Instituto Aço Brasil projected a 0.6% decline in crude steel production in 2025. Yet despite this situation, Brazil’s steel industry remains optimistic about the measures being pursued by Brazilian trade negotiators.

Brazil uses import quotas, so that when imported volumes exceed the limit, a 25% tariff applies to several types of steel products. This rate is applied to volumes above the quotas to protect the domestic industry, while products within the quotas may face lower tariffs (9% to 16%). The measure was extended to 2025 and covers various steel goods.

The measure responds to requests made by Abimetal-Sicetel (the Brazilian Association of the Steel Processing Industry and the National Union of Drawn and Rolled Ferrous Metals Industry), one of the organizations representing Brazil’s steel-processing sector.

The extension applies to six products manufactured by companies represented by the entity: galvanized low- and medium-carbon steel wire; high-carbon steel wire coated with other common metals; wire of different steel alloys; scaffold, formwork, or shoring material; welded galvanized steel mesh and grating at points of intersection; and steel nails.

Sector specialists forecast a 1.3% recovery for 2026, raising global demand to 1.772 million tonnes. Global steel demand in 2025 is expected to remain stable compared with 2024, reaching around 1.750 million tonnes.

IPEA warns of risk

A study released by the Institute for Applied Economic Research (Ipea) estimated that the 25% U.S. tariff could cause a 2.19% drop in Brazilian steel output, an 11.27% contraction in metal exports, and a 1.09% decline in imports. This means Brazil would see export losses equivalent to US$1.5 billion and an output reduction of nearly 700,000 tonnes in 2025.

“This is because the United States is a significant market for Brazilian steel. In 2024, the latest full-year data we have, they were the destination for more than half of Brazil’s exports. Therefore, it is a crucial market for Brazilian steel, which is why addressing this issue is so important,” explained Fernando Ribeiro, coordinator of International Economic Relations at Ipea and author of the study.

Despite the significant impact on the sector, the macroeconomic effect remains limited. The study forecasts a drop of only 0.01% in GDP and 0.03% in total exports, with a positive effect of US$ 390 million on the trade balance, since the decline in economic activity will also lead to lower imports (–0.26%).

Source: Diário do Vale

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