Brazil Markets Slump as U.S. 50% Tariffs Near, Central Bank Holds Rates

Brazil's financial markets are facing significant uncertainty due to looming U.S. tariffs set to impose a 50% duty on Brazilian exports starting in August 2025, threatening key sectors like agriculture and manufacturing with potential losses up to R$15 billion annually. The Brazilian government is actively engaging with U.S. companies and officials, including major tech firms, to negotiate alternatives to these tariffs amid ongoing trade tensions. President Donald Trump has escalated the dispute by threatening tariffs linked to Brazil’s legal actions against former President Jair Bolsonaro, prompting legal challenges over the scope of his executive authority under the IEEPA. Brazil's main stock index, Ibovespa, has reacted negatively, dropping to its lowest level since March as investors await the Central Bank’s decision to maintain a high 15% interest rate amidst fragile fiscal conditions and inflation pressures. This situation unfolds while the Trump administration simultaneously negotiates trade deals with other major partners like the European Union, aiming to avoid broader trade wars through agreements that include tariff adjustments. The evolving dispute highlights the delicate balance Brazil must maintain between managing external economic pressures and sustaining domestic growth.