Brazil is expected to be comparatively less affected by recent US tariff changes, as its previous nominal tariff level was among the highest and is now likely to fall. Existing exemptions and shifting trade patterns are expected to limit the overall economic effect.
Brazil’s earlier tariff level is described as 10% reciprocal tariffs plus 40 percentage points in punitive tariffs. Even if a general 15% US tariff is introduced, Brazil’s nominal rate is still expected to decline.
Around 60% of Brazilian imports to the US were estimated to be exempt from a 50% tariff, and these exemptions are expected to remain. Additional exemptions reduced tariffs to between 10% and 50% for parts of the remaining 40%.
As a result, goods already covered by exemptions may see limited change in tariff treatment. Lower tariffs are more likely in smaller product categories, which may rise in exports to the US in the next few months.
The expected benefit for the Brazilian Real is described as slight. The article notes it was produced using an AI tool and checked by an editor.
We see the new US tariff plan as a relative positive for Brazil, but its impact on the Brazilian Real will be limited in the coming weeks. The high 50% nominal tariff from the 2025 regime is set to fall, which on the surface appears very bullish for the currency. However, the actual benefits are much smaller than the headline numbers suggest.
The market has already priced in some of this optimism, with one-month implied volatility for USD/BRL options easing to 15% from its January highs. Last year’s trade data, which saw bilateral flows between the US and Brazil exceed $100 billion, shows the importance of this relationship. But we must remember that a large portion of this trade was never subject to the highest tariffs.
Looking back at the 2025 framework, complex exemptions meant the effective tariff rate was far lower than the 50% nominal rate for most major goods. Our analysis showed that roughly 60% of Brazilian imports to the US were likely exempt from the highest punitive rates. This means the upcoming reduction provides less of a boost than it seems, as the starting point was not as bad as it looked on paper.
For derivative traders, this suggests that outright long positions on the BRL may be too aggressive. We believe strategies that profit from a slight appreciation or range-bound price action are more suitable, such as selling out-of-the-money USD calls or implementing BRL call spreads. This approach captures the modest upside potential without taking on excessive risk if the currency fails to rally significantly.
The most interesting developments will likely appear in specific, smaller export categories that were fully exposed to the old tariffs. Watch for rising export volumes in sectors like processed agricultural goods and certain manufactured components over the next quarter. A potential trade could involve looking at equities of specific exporters rather than a broad bet on the entire currency.
