Tobacco tops list of Rio Grande do Sul exports at risk from proposed U.S. surcharge, Farsul says

A proposal under review in the United States to apply a 25% surcharge on Brazilian imports has raised concerns for agribusiness in Rio Grande do Sul, especially the tobacco supply chain, one of the state’s top export sectors. The study was prepared by Farsul’s Economic Advisory Office and released on Tuesday (2).

According to the survey, Rio Grande do Sul is among the Brazilian states most exposed to the measure. Of the US$1.34 billion exported by the state to the U.S. market, about 81.1% would be subject to the new tariff, well above the national average of 43.7%.

Tobacco is the main concern. Exports of unmanufactured Virginia tobacco alone totaled US$122 million in sales to the United States and could face an additional surcharge estimated at US$30 million. Burley tobacco exports totaled US$49 million and would also be directly affected by the measure.

Together, the two types of tobacco account for 31.4% of Rio Grande do Sul agribusiness exports potentially affected by the U.S. proposal, underscoring the state’s dependence on the sector in its trade relationship with the United States.

Rio Grande do Sul’s vulnerability stems from the composition of its export basket. Unlike other Brazilian states, whose main products were included on exclusion lists prepared by the Office of the United States Trade Representative, or USTR, tobacco and forestry products from Rio Grande do Sul were left out.

While items such as fresh beef, green coffee, concentrated orange juice and fertilizers received protection in the negotiations, tobacco exported by Rio Grande do Sul was not included. As a result, only 18.9% of the state’s exports to the United States would be protected by the exclusions, compared with 56.3% of Brazilian exports overall.

The impact on agribusiness would also be significant. About 74.9% of Rio Grande do Sul’s agricultural exports to the United States, equivalent to US$575 million, would fall within the scope of the proposal, with a potential tariff impact estimated at US$144 million.

In addition to tobacco, other products important to the state economy would also be affected, including sawn pine wood, with US$81 million exported, and leather footwear, with US$62 million.

Farsul noted that the estimated figures do not represent automatic losses for exporters. The effects could take different forms, including lower profit margins, reduced shipment volumes, loss of competitiveness against international suppliers or the partial transfer of costs to U.S. importers.

The proposal is being discussed as part of a U.S. trade investigation under Section 301 of the Trade Act of 1974. In addition to tariff issues, Washington is also reviewing matters related to Pix, intellectual property, ethanol market access, preferential tariffs and Brazilian environmental policies.

For Rio Grande do Sul, Brazil’s largest tobacco-exporting state and one of the world’s main suppliers of the product, the outcome of negotiations between Brasília and Washington will be decisive for maintaining the sector’s competitiveness and preserving an important source of income for thousands of producers and municipalities that depend on the tobacco supply chain.

Source: Olá Jornal

Sharing is caring!