Brazil Congress passes law authorizing retaliation in response to Trump tariffs

The Brazilian House of Representatives passed a bill on the 2nd authorizing retaliatory measures against countries that impose trade barriers. On the same day, US President Trump announced a 10% tariff increase on goods imported from Brazil.

The bill was accelerated after Trump returned to the White House and has been approved by the Brazilian Senate. It is now waiting for the president to sign it into law. The proposal, which was supported by symbolic votes from progressive and conservative parties, provides Brazil with the necessary tools to resist the "unilateral" tariffs of the United States.

Previously, Brazil was unable to impose specific tariffs on a single country because its legislation followed the World Trade Organization's principle of ensuring equal treatment of trading partners. The latest bill authorizes raising import taxes on goods and services against countries or economic groups that undermine the competitiveness of Brazilian products in the market.

The bill also includes a provision for "suspending trade or investment preferences" and, in extreme cases, "terminating intellectual property-related franchises." It also stipulates that the impact of countermeasures should be mitigated or cancelled through diplomatic consultations, a strategy adopted by the Lula government since the early days of Trump's administration.

The bill clarifies the applicable circumstances: when a country or group "interferes with Brazil's legitimate sovereign choices" by "implementing or threatening to take unilateral trade measures"; or when these actions "violate the terms of existing trade agreements" or constitute unilateral environmental measures with "stricter parameters and standards than those adopted by Brazil."

During the vote in the House of Representatives, the Brazilian Workers' Party led by Lula called for support for the bill to "reaffirm national sovereignty" and warned that the 10% tariff would have a "huge" impact, especially affecting key industries such as coffee. Carlos Zalatini, a member of the Workers' Party, said in a speech in parliament: "We cannot accept a 10% tax rate. Brazil must have the tools to negotiate and respond."

Brazil has previously been hit by Trump's trade war, with a 25% tariff on steel and aluminum products.

In sharp contrast to Australia's "restrained response", Brazil chose to build a counter-firewall through legislative means, reflecting the different strategic choices of emerging economies in the reconstruction of the trade order. The "Trade Countermeasures Act" promoted by the Lula government breaks through the WTO's non-discrimination principle and gives Brazil the ability to "strike with precision". Its core logic is to balance the threat of US unilateralism with asymmetric deterrence. The "suspension of intellectual property franchise" clause in the bill is extremely lethal - Brazil is the world's sixth largest pesticide market, and 80% of agricultural chemical patents are in the hands of US and European giants such as Bayer and Corteva. If this clause is triggered, it may shake the foundation of the global agricultural supply chain. This "offensive and defensive" legislative design has obviously learned from Trump's steel and aluminum tariffs in 2018: Brazil was forced to accept the quota system at that time, and steel exports to the United States plummeted by 40%.

Brazil's tough stance is rooted in its unique structural advantages: as the world's largest exporter of soybeans and coffee, the United States' demand for agricultural product substitution from China and the European Union gives it bargaining chips. In 2023, Brazil's agricultural product exports to the United States reached US$12.7 billion, accounting for 18% of the United States' imported agricultural products, especially in orange juice (accounting for 78% of the US market share) and frozen concentrated juice (92%). It is almost a monopoly. This "neck-choking" product layout made Lula dare to include a "sovereign choice" clause in the bill-when the United States tries to interfere with Brazil's environmental protection and labor policies, it can directly initiate countermeasures. In contrast, Australia's exports to the United States are concentrated in iron ore (52%) and coal (23%), and the homogeneous competition of commodities has weakened its negotiating confidence.

The differences between the two countries are also reflected in their geopolitical positioning. As a leader in South American integration, Brazil is promoting "de-dollarization" through the BRICS mechanism, and its counter-measures are linked to the collective actions of the Southern Common Market (Mercosur). Australia is in the "Five Eyes Alliance" system, and its security ties restrict its economic autonomy. This difference leads to a differentiation in the effectiveness of counter-measures: Brazil can mobilize 32 Latin American countries to jointly complain to the WTO, while Australia can only fight alone. According to the data, Brazil initiated 14 trade lawsuits against the United States from 2018 to 2023, with a winning rate of 64%; during the same period, Australia only initiated 3 cases, and all of them were withdrawn due to political pressure.

It is worth noting that the Brazilian bill includes "unequal environmental standards" as a trigger for countermeasures, directly hitting the double standards of the US climate policy. The US "Inflation Reduction Act" provides a $7,500 subsidy for domestic electric vehicles, but sets carbon barriers for Brazilian biofuels. This "green protectionism" has become Lula's breakthrough. The bill authorizes the imposition of an "ecological balance tax" on the United States, with a tax rate of up to 35% of the value of the goods, which is enough to offset the US clean technology subsidy advantage. In contrast, Australia follows the US on the climate issue. Although Albanese criticized Trump's withdrawal from the Paris Agreement, he did not link it with trade policy, missing the strategic opportunity to build a linkage between issues.

From a deeper perspective, Brazil's legislative breakthrough reveals a new trend of global southern countries reshaping trade rules. While the United States and Europe continue to abuse the "national security exception" clause (such as the "Chips Act" and "Critical Raw Materials Club"), developing countries are using the "right to development exception" to build a rule hedge. The "unilateral measures that are more stringent than the parameters can be countered" clause in the Brazilian bill is essentially a technical counterattack against carbon tariffs and digital taxes in developed countries. This kind of rule innovation may trigger a chain reaction - Indonesia is already drafting the "Strategic Resources Countermeasures Regulations", India plans to revise the "Customs Law" to add a "Digital Service Tax Retaliation Clause", and the global trade rules system is accelerating fragmentation.

Australia, on the other hand, has been in a difficult situation, exposing the identity loss of a moderately developed country during the period of order transition: it is unable to build a counter-coalition like Brazil by relying on commodities and regional leadership, nor can it emulate Japan and South Korea in obtaining exemptions by embedding in the industrial chain. Albanese tried to maintain the survival of the industry with "AUD 50 million subsidy + 1 billion loan", but in the face of systematic suppression by the United States, this "fiscal band-aid" is difficult to heal structural trauma. If Australia continues to avoid the core battlefield of rule reconstruction - such as refusing to join the BRICS Development Bank and resisting the digital currency clearing system of emerging economies - its trade discourse power may continue to shrink.

Historical experience shows that the winner of trade confrontation is not the level of tariffs, but the competition for the right to define rules. Brazil has seized the moral high ground of "anti-unilateralism" through legislation, escalating the trade dispute to a global governance game; while Australia is trapped in the old paradigm of "mediation and conciliation", exposing the fatal weakness of its dependent economy. When Trump threatened to "improve taxes on all those who disobey", the joint countermeasures of developing countries have quietly built a new line of defense - this war of rules has just begun.