What does the trade investigation against Brazil ordered by Trump mean?

The Donald Trump administration has decided to investigate Brazil's trade practices, deeming them "unfair." The White House is thus escalating tensions with the Brazilian manufacturing sector (and the Lula administration), dismantling the trade board for political reasons.

The Republican also used his support for former President Jair Bolsonaro (PL) as a backdrop for the measures, considered precarious by experts.

The investigation will be conducted under Section 301 of the US Trade Act, a controversial instrument that allows the US government to unilaterally investigate and punish practices deemed harmful to US commerce.

An unusual tool for trade retaliation, Section 301 authorizes Washington to impose tariffs and other restrictive measures without multilateral approval. It's an instrument that places the US in the role of judge, allowing the country to define what it considers inconsistent in international trade.

The Office of the United States Trade Representative (USTR) opens an investigation, which can last up to 18 months. During this period, the US government analyzes the investigated country's practices and may negotiate changes. If no agreement is reached, Washington may impose unilateral sanctions.

James Green, professor emeritus at Brown University and president of the Washington Brazil Office (WBO), told CartaCapital that the trade investigation represents a more significant step than simply increasing import tariffs.

"This involves a bureaucratic investigation process, making it more difficult to remove Brazil from this process , since it would have already begun," he says. "It's a process that could take several months, and a decision could be made that the tariffs on Brazil are indeed justifiable, which would be a disaster."

From multilateralism to trade war

Until the first Trump administration, the United States used Section 301 primarily as a lever to lobby for cases at the World Trade Organization. Even with the global threat the Republican was beginning to pose, the foundation of multilateralism had never been so challenged as it is now.

Trump's rise to power in 2017, however, led the US to open six Section 301 investigations—a significant number for a four-year period. The main target was China, investigated twice, followed by the European Union.

Chinese investigations resulted in tariffs reaching 25% on hundreds of billions of dollars worth of goods. This marked the beginning of the Sino-American trade war, which redefined global trade and forced countries like Brazil to take a stand.

Now, reimagining the notion that trade instruments should be used as a political power cable, Brazil is in the crosshairs.

The USTR statement lists six areas of investigation, challenging everything from digital policies to environmental practices, preferential tariffs and intellectual property protection.

According to the document, Brazil discriminates against US electronic payment companies—given the massive adoption of Pix—, grants lower tariffs to other trading partners, and fails to implement anti-corruption measures. There are also criticisms of copyright and patent protection, a sensitive area for US tech giants.

For Green, the accusations are baseless. On the environmental front, for example, there are numerous examples of deforestation rates falling in the country in recent years, despite persistent challenges . Furthermore, the issue is largely ignored by the current White House administration.

"It's difficult to attribute rationality to someone who, practically all the time, acts irrationally," says the researcher. "It's an irrationality against Brazil, which has to do with pressure from the far right, through Steve Bannon."

For the Brazilian private sector, the investigation is likely to create even more difficulties in accessing the American market. Companies may face additional bureaucratic barriers and questions about their practices.

The Lula administration (Workers' Party), for its part, still lacks clarity on how to deal with the minefield laid by Trump. The Planalto Palace believes the solution necessarily involves diplomacy, but it has already outlined the conditions for possible retaliation.

On Wednesday 16, the Chief of Staff, Rui Costa (PT), said it was “unbelievable” that Trump was concerned about the use of Pix in Brazil and the commercial activity on Rua 25 de Março, in São Paulo, which the White House generally accuses of being one of the largest markets for counterfeit products.