Brazil's Lula pledges retaliation to Trump tariffs but keeps diplomacy open

BRASILIA — President Luiz Inacio Lula da Silva said he wanted to find a diplomatic solution to President Donald Trump's threat of 50% tariffs on Brazilian exports, but vowed to reciprocate like-for-like if they take effect on Aug. 1.

"We'll first try to negotiate, but if there's no negotiation, the law of reciprocity will be put into practice," Lula said in an interview to Record TV, citing a law Congress recently passed giving the president powers to retaliate against trade barriers. "If they're going to charge us 50, we'll charge them 50."

The president is unlikely to announce any retaliatory measures until the tariffs are implemented, said a Brazilian diplomat who requested anonymity to describe internal government debates. "We have until Aug. 1," the source added.

In a letter to Lula published on Wednesday, Trump linked the tariffs to Brazil's judiciary launching legal proceedings against former President Jair Bolsonaro, who is on trial over charges of plotting a coup to stop Lula from taking office in 2023 after hundreds of pro-Bolsonaro supporters stormed Congress. He said Bolsonaro was the victim of a "witch hunt."

Lula criticized Bolsonaro for perpetuating claims of legal persecution, stressing that the former president's son, Eduardo Bolsonaro, took leave from his role in Congress, at least in part to lead a campaign in his father's favor in the U.S.

"The former president of the Republic should take responsibility, because he is agreeing with Trump's taxation of Brazil. In fact, it was his son who went there to influence Trump's mind," said Lula.

In a social media post late on Thursday, Bolsonaro said Trump's letter announcing tariffs was received with "a sense of responsibility," adding he respects and admires the U.S. government.

Bolsonaro argued the U.S. measure was a reaction to Brazil's distancing from freedom. "This would never have happened under my government," he wrote.

The former president also urged the powers to act by presenting measures to restore what he called "institutional normality."

Market reaction

Lula said the government will set up a committee with Brazilian business leaders to "rethink" the country's commercial policy with the U.S. He also mentioned Brazil's new reciprocity law, passed just after Trump made his first tariff announcements in April, that allows the government to respond with reciprocal measures in case other countries impose unilateral barriers to Brazilian products.

Beyond imposing countertariffs, the law would also allow Lula to restrict imports, investments and suspend intellectual property rights from U.S. firms, among other measures.

The U.S. is Brazil's second-largest trading partner after China and has a rare trade surplus with Latin America's largest economy. While the broader economic impact on Brazil appeared limited, some sectors, including aviation and banking, felt immediate pressure.

Shares of some Brazilian firms declined on Thursday, with planemaker Embraer and major banks such as Itau Unibanco and Banco Santander posting losses.

But the tariffs could inflict pain in the U.S. too, disrupting food prices, given Brazil's role as a major agricultural exporter of coffee, orange juice, sugar, beef and ethanol. The proposed 50% tariff would effectively halt the flow of Brazilian coffee to the United States, its largest buyer, four trade sources told Reuters on Thursday.

Brazilian industry lobby groups representing sectors such as coffee and oil issued statements on Thursday, urging for a diplomatic solution to the crisis.

"We hope that diplomacy and balanced negotiations will prevail, despite ideologies and personal preferences, and that common sense will once again guide the relationship between these two great sovereign nations," Josue Gomes da Silva, the president of Sao Paulo industry group Fiesp, said in a statement.

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