Trump’s protectionist push poses challenge for Brazil’s agribusiness

Donald Trump’s election raises the possibility of a global “protectionist spiral” and a shift toward bilateral trade relations, posing challenges for Brazil’s agribusiness on the world stage, experts say.

During Mr. Trump’s first term, his trade war with China boosted Brazilian agricultural exports as Chinese importers turned to Brazil for supplies. However, analysts believe the room for this dynamic to repeat itself is limited.

“We’re already exporting 37% of our products to China. Any increase in exports to China would likely be marginal, as other countries would benefit as well,” stated Ambassador Rubens Barbosa, former Brazilian representative in London and Washington and current chair of the Brazilian Wheat Industry Association (Abitrigo).

Brazilian agribusiness exports grew by 20% annually during Mr. Trump’s presidency from 2017 to 2021, filling the void left by reduced American exports due to Chinese retaliatory tariffs.

The chart below reveals the most exported goods in maritime containers from Brazil to the United States between January and August 2024. The data, extracted from Datamar’s DataLiner platform, comprise only maritime, long-haul shipments.

Top Exports in Containers to the US | 2024 | TEUs

Source: DataLiner (click here to request a demo)

Marcos Jank, coordinator of Insper’s Agro Global Center, noted that Brazil now exports more to China than the U.S., with revenues totaling $63 billion annually compared to the $35 billion American exports bring to the Chinese market. “We have taken over the U.S. position in soybeans, corn, meat, and other products,” he said.

Mr. Jank added that if Donald Trump reimposes tariffs on Chinese goods, Brazil may gain “additional markets” in China, but losses elsewhere are also likely. “We could lose markets elsewhere because international trade operates like interconnected vessels. If the U.S. can’t sell to China, it will find other markets, impacting us indirectly,” he explained.

According to Mr. Jank, the more significant risk is the resurgence of “a protectionist spiral and mercantilist policies, focusing more on bilateral than multilateral relations. Such a trend would negatively affect global trade,” he noted.

In response to these potential shifts in U.S. trade policy, Brazil should emphasize alliances with the global South, Agriculture Minister Carlos Fávaro advised. Speaking to journalists in Uruguay, he stressed that “strengthening BRICS and South-South relations is key to expanding our negotiations,” underscoring the high population density and resource wealth in these regions.

Mr. Trump’s return to the White House would likely intensify a geopolitical strategy centered on friendshoring, a model that emphasizes bilateral relations founded on shared values and worldviews rather than on pure commercial pragmatism. According to Mr. Jank, Americans are increasingly scrutinizing other countries’ ties with China.

“[Friendshoring] will have a strong impact and challenge us to engage both sides,” he noted, highlighting that Brazilian agribusiness includes numerous American companies in the sectors of agribusiness, inputs, and trading, while China remains Brazil’s primary client. “We need to maintain a prudent equidistance,” he added.

In the geopolitical sphere, the Republican’s promise to halt support for Ukraine against Russia may have limited implications for Brazil, according to Rubens Barbosa. “If there is peace, it will ease Russia’s agribusiness exports. Brazil is a significant importer of oil, natural gas, diesel, and wheat from Russia, so trade should become easier,” he stated. However, he doesn’t expect Mr. Trump to immediately cease support for Ukraine or expect such a move to produce immediate effects.

On the macroeconomic front, Mr. Trump’s new term remains unpredictable. “If he delivers on his promise to raise import tariffs, it would create global challenges. It would drive up inflation and interest rates in the United States due to the public deficit, impacting Brazil’s economic policy. The dollar would gain ground, forcing Brazilian interest rates up and affecting inflation,” said Mr. Barbosa.

At the same time, while promoting an expansionary fiscal policy, Mr. Trump has also pledged to cut taxes to combat inflation. “If he adopts a stimulus policy, one approach could be to reduce interest rates, boosting investor appetite for other markets, like Brazilian agricultural companies,” said Rafael Gaspar, a partner in capital markets and banking at Pinheiro Neto Advogados.

Mr. Gaspar added that this could favor Brazilian agribusiness issuance of debt securities abroad. However, he doubts that Mr. Trump would open his administration with stimulus policies, believing he would initially prioritize inflation control. For Mr. Gaspar, a trade war “isn’t necessarily bad” and could create opportunities for Brazil to expand its exports.

(Rafael Walendorff contributed reporting from Brasília.)

Translation: Todd Harkin

Source: Valor International

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