The tariff hike could eliminate 110,000 jobs and cause billions in losses for companies.

A new scenario of uncertainty looms over the Brazilian economy. The 50% tariff hike imposed by the United States, effective August 1st, will not only affect the trade balance. It could also result in billions in losses for companies and thousands of job losses.

Studies conducted by the National Confederation of Industry (CNI), the Federal University of Minas Gerais (UFMG) and analyses by XP Investimentos detail how this "tariff hike" - imposed by a partner that is the main market for the Brazilian manufacturing industry - can reach the heart of the economy in strategic states.

The situation could worsen if Trump decides to use more "weapons" from his arsenal of possible measures. A trade investigation into Brazil is ongoing. Another source of concern for experts is possible additional retaliation by Trump against Brazil due to the operation carried out by the Federal Police (PF) against former President Jair Bolsonaro this Friday (18).

Trump's decision on the tariff hike, communicated by letter to President Luiz Inácio Lula da Silva (Workers' Party), breaks with previous patterns of tariff application, and the main justification is not commercial, but rather political differences, including the treatment given to former President Jair Bolsonaro and debates on the regulation of social networks.

The approach, according to the Brazilian Confederation of Agriculture and Livestock (CNA), demonstrates a "hijacked political agenda" that insists on revolving around a sterile and paralyzing agenda, marking Brazil for "ideological and anti-national radicalism" abroad.

The cost of the "Tarifaço": R$19 billion less in GDP and Impact on the states

Projections from the Center for Economic Modeling Studies (Nemea) at UFMG are stark: the "tariff hike" would result in a 0.16 percentage point reduction in Brazil's Gross Domestic Product (GDP), equivalent to R$19.2 billion. For this year, the financial market estimates a 2.23% increase, according to a survey conducted by the Central Bank (BC).

The reduction will not be evenly distributed. The greatest impact is expected to be felt by:

• São Paulo : with a drop of R$4.46 billion in the state's GDP.
• Rio Grande do Sul: with a reduction of R$1.92 billion.
• Paraná: recording a loss of R$1.91 billion.
• Santa Catarina : with a negative impact of R$1.73 billion.
• Minas Gerais: which would have a decline of R$1.66 billion.

These figures directly reflect the weight of the sectors most affected by the tariff measures and their deep integration into national and international production chains. The manufacturing industry and agribusiness are expected to be hit hardest.

The UFMG projection points to a loss of approximately 110,000 jobs nationwide. Agriculture would be the sector with the largest job losses, with approximately 41,000 jobs eliminated. Next comes commerce (31,000) and manufacturing (26,000).

Manufacturing industry is under intense pressure

São Paulo is expected to be primarily affected in the manufacturing, trade, and transportation industries. A prime example is commercial aircraft manufacturer Embraer , which derives approximately 23.8% of its revenue from exports to the US. The company, headquartered in São José dos Campos, São Paulo, also assembles jets in Florida and sources approximately 40% of its components from the US.

The 50% tariff will severely impact the sector, which was already facing a 10% tariff and is now facing a 40 percentage point increase. XP Investimentos estimates an additional annual cost of US$80 to 90 million for every 10 percentage points of tariff increase for Embraer, which could represent a 5 to 6 percentage point impact on the EBIT margin—the percentage of revenue that turns into profit from its core operations alone—in the most adverse scenario.

The impact is so significant that not even American companies like Boeing would be interested in maintaining these tariffs, given the interdependence of the supply chains, highlights CNI president Ricardo Alban.

Steel, machinery and consumer goods are also in the spotlight

Another segment of the manufacturing industry that will be affected is machinery and equipment, including those for agriculture. Itaú estimates that exports of tractors and agricultural machinery could shrink by 20%. According to XP Investimentos, companies such as Santa Catarina-based WEG and Rio Grande do Sul-based Randoncorp and Frasle could be negatively impacted by the tariff hike.

Of these, WEG has the most options to overcome the situation. XP analysts point out that one of the first measures that could be taken is to adjust the prices of products exported to the world's largest economy. The strategy would need to be carefully calibrated to avoid affecting production. Another alternative is to reallocate production to countries that have WEG units and are subject to lower tariffs, such as Mexico.

Although the steel and aluminum industries have already been subject to taxes, the new 50% tariff on "automobiles and steel from any country" exacerbates the situation. Semi-finished iron and steel products are among the main exports to the US. Companies such as Tupy, Gerdau, CSN, and CBA will be the most affected.

Industrial segments such as household and other textiles, fabrics, processed yarns and fibers, wood products, and footwear and leather goods will also face significant declines in exports—over 10% for some textiles and 4.2% for wood products—and a decline in production. Alpargatas has affected approximately 4% of its consolidated sales.

Alban highlights that, although they do not have the same volume as large sectors, these segments are highly representative of local exports and reach small and medium-sized industries, with cases such as Ceará, where 45% of exports go to the USA.

Brazilian agribusiness in the firing line

UFMG projects that the greatest job losses will occur in agriculture. At least 40,000 jobs could be lost. Meat, coffee, sugar, and orange juice are some of the products expected to feel the most impact from Trump's tariff hike.

Meat, coffee and sugar: strategic exports under threat

Pork and poultry exports are expected to fall by more than 11%, with production reductions of up to 4%, according to Itaú estimates. Beef exports will also see a 4.1% drop.

Although Minerva is one of the most affected companies in exports to the US (8% to 15% of revenue), the possibility of redirecting to other markets may mitigate part of the impact, but with likely loss of margins.

Coffee beans lead agribusiness exports to the US, the world's largest consumer. In the first half of the year, sales reached US$1.2 billion—one-sixth of the segment's foreign trade. BTG Pactual estimates that, with Trump's measures, sales to the US could fall by 6%. Processed coffee sales could fall by 1.4%.

UFMG projects a 5% reduction in exports and a 2.7% reduction in sugar production due to the tariff measures. One of the most affected companies will be Jalles Machado, as most of its organic sugar exports—about 11% of projected revenue—go to the United States. XP points out that the company could postpone shipments and redirect part of the volume to South Korea. This redirection, however, cannot fully offset the effects of the tariffs in the US.

The Orange Juice Dilemma for the American Market

The 50% tariff announced by the United States could jeopardize sales of Brazilian orange juice to the American market, according to the National Association of Citrus Juice Exporters (CitrusBR). In the first half of the year, exports totaled US$655 million.

Brazilian companies would face difficulties in directing production to other markets. Europe currently purchases 52% of Brazilian juice, but has already reduced its imports. There are fears of a sharp drop in prices.

The political factor behind the trade barrier

Brazil maintains a strategic and complementary relationship with the United States, built over 200 years of economic integration. The 50% tariff is considered "extremely disproportionate," given that Brazil applied an average real tariff of 2.7% to imports of American products in 2023.

Faced with the threat, Brazilian industry, through the CNI, has sought dialogue with American business leaders and the federal government. Alban says the measure is a "lose-lose" for both countries.

According to him, imposing a 50% tariff is "definitely like an embargo." "There's no way this could be a market regulator. So, this possibility will certainly lead to a series of unemployment in Brazil and, certainly, in the United States as well, because we're talking about complementary products," he reinforces.

The CNA criticizes the focus on "personal political crises" that divert the country from its potential as a "strategic supplier of food, clean energy, and critical minerals." The organization concludes that "the economy cannot continue to be hostage to political narratives that fuel extremes and paralyze decisions. Brazil needs to look forward again. And this requires maturity on all sides."