Donald Trump announced Monday (December 2nd) that the United States will impose tariffs on imports of steel and aluminum from Brazil and Argentina, taking by surprise one of its main allies , the Brazilian president, Jair Bolsonaro.
The US president justified his decision by the need to respond to the devaluation of the currencies of these countries, ignoring the current economic crisis in Argentina. "Brazil and Argentina have massively devalued their currency, which is not good for our farmers", tweeted the tenant of the White House. "With immediate effect, I will restore customs duties on all steel and aluminum shipped from these countries to the United States.", he added.
This announcement is very bad news for Brazil, the second largest steel supplier in the United States. The same goes for Argentina, which exports most of its steel and aluminum to the world's largest economy.
Punitive tariffs
Jair Bolsonaro, who prides himself on having excellent relations with Donald Trump, immediately reacted, saying he was ready to call his American counterpart, hoping that he "Comprise". "I have a direct line with him", he told reporters outside his residence in Brasilia. A little later, in a short interview to local media, Radio Itatiaia, Jair Bolsonaro also hoped that Donald Trump "Comprise" the position of his country and do not "Will not penalize".
In March 2018, Donald Trump announced global tariffs of 25% on steel and 10% on aluminum before agreeing to remove them for a few months later. Argentina and Brazil, as well as for other countries. In exchange for this exemption, Brazil had agreed to establish export quotas. "I gave them a big boost on the rates, but now it's over", later told the US president to reporters, referring to Brazil and Argentina.
Although many economists lament the imposition of punitive US tariffs on hundreds of billions of imports, Donald Trump has once again defended this strategy, pointing out that Washington was banking "Huge sums" thanks to these taxes. He further considered that, thanks to tariffs, US financial markets were "Up 21%".
However, companies have slowed their investments in the United States and US farmers, who suffered reprisals including China, are struggling. And US steel continued to suffer as employment in the steel sector continued to decline while production was halted in some blast furnaces last month.
Brazil and Argentina, in part, benefited from the Sino-US trade war by substituting the United States for exports of soya and other agricultural products.
The US president also asked the Federal Reserve (Fed) to" Act in consequence " for other countries "No longer benefit from the strength of our dollar by devaluing their currency".
Historical record of currency decline
In 2018, the United States imported more than 3.98 million tons of steel from Brazil, worth nearly $ 2.5 billion, according to data from the US Department of Commerce.
Last week, the Brazilian currency, the real, crossed for the first time the threshold of 4.27 reais for a dollar, new historic record of decline. A depreciation due, according to analysts, not to any intervention of Brasilia, but to international uncertainties and doubts about the ability of the Bolsonaro government to implement its austerity reforms.
The decision of the American president "Wears a hard blow to (tenant of the) Planalto Palace who saw Washington as an ally ", said André Perfeito, from the consulting firm Necton, who calls the measure "Disproportionate".
As for Argentina, the country, in recession for twenty months, saw the value of its currency, the peso, collapse. According to the International Monetary Fund (IMF), its economic activity is expected to contract by 3.1% this year. And inflation is expected to reach 50% by the end of the year, according to several international organizations.
Last year, the United States imported 168,922 tons of steel from Argentina, representing $ 220.25 million, according to the US administration.
The Brazilian Institute of Steel (IAB) reacted by saying "Perplexed". Recalling that "The exchange rate in the country is free", he stressed that these measures would eventually "To harm the American steel industry itself, which needs the semi-finished products exported by Brazil to run its factories".
