Argentina, Brazil suffer as Trump appeals to base

Why has US President Donald Trump reimposed tariffs on US$2.6bn worth of steel imports from Brazil as well as steel and aluminum from Argentina?

Trump cited "the massive devaluation" of the Argentine peso and the Brazilian real to justify restarting the full tariffs, which both countries in 2018 negotiated down to a quota system, with additional shipments subject to a 25% tax for steel and 10% for aluminum.

But the key phrase of his early Monday tweet-as-policy was the ensuing sentence: "which is not good for our farmers."  

“Since Mercosur and EU announced a trade deal earlier this year, US farmers have been pressuring Trump to counterattack, since farming products from South America will quickly replace US goods in the European market,” the head of Brazil’s exporters association AEB, José Augusto de Castro, told BNamericas.

Argentina, Brazil, Paraguay and Uruguay are the active members of Mercosur.

Facing an impeachment inquiry from the Democratic-controlled House of Representatives that threatens to remove him from power or weaken him ahead of the 2020 presidential elections, the US president needs to acquiesce to his political base, which includes farmers already hard-hit by his trade war with China. 

“Today’s announcement must serve as an alert for the Brazilian government that the only priority for Trump is his reelection. He is not committed to establishing long-term trade ties with any nation in particular,” Castro added.

“The recent depreciation of the Brazilian and Argentina currencies, cited by Trump today, was just a perfect excuse to impose retaliation against both nations right now.”

STEEL SECTOR REACTION

“The decision to tax Brazilian steel as a way to compensate US farmers is a retaliation against Brazil, which is not consistent with the partnership relation between the two countries," Brazil's steel association IABr said in an e-mailed statement.

IABr added that the tariffs will also hurt the US steel industry, which needs semi-finished steel products from Brazil in order to operate its mills.

Export volume of Brazilian semi-finished steel products to the US market declined to 2.85Mt in January-November from 3.44Mt in the same period last year.

A BLOW FOR BOLSONARO 

Since beginning his four-year term January, Brazil's far-right President Jair Bolsonaro has said multiple times that one of his main foreign policy goals was to forge closer ties with the US. He has also expressed admiration for Trump, with whom he feels ideologically close.

So the decision to slap Brazil with the full steel tariffs represents a major foreign affairs setback for Bolsonaro, who is struggling with low approval ratings at home.

Questioned by reporters on Monday morning, Bolsonaro said he would talk with economy minister Paulo Guedes before taking any action. 

Argentina – which exports around US$700mn worth of steel and aluminum shipments per year – is undergoing a transition of power, with president-elect Alberto Fernández set to be sworn in on December 10. In reaction to Monday's announcement, current production minister Dante Sica said President Mauricio Macri's administration had reached out to US officials and would present a united front with Brazil.

Fred Barbosa contributed to this article.