Lula Floats Retaliatory Tariffs If Trump Hits Brazil First

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President Luiz Inacio Lula da Silva said Brazil is prepared to respond if Donald Trump places new tariffs on the country’s products, although he hopes to improve trade relations with the US instead.

Trump has repeatedly threatened to place tariffs on goods from Mexico and Canada as soon as Feb. 1, while at times listing Brazil among the nations that levy steep costs on the US-made items.

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“If he puts tariffs on Brazilian products, there will be reciprocity in Brazil in putting tariffs on exported products” from the US, Lula told reporters Thursday in Brasilia. “It’s simple.”

“For my part, I want to improve our relationship. Export more if necessary, import more if necessary,” he added.

The Brazilian leader did not offer specifics on goods his government could target, or those that may face risks from the US. But the stance mimics the posture of Canadian Prime Minister Justin Trudeau, who has said his nation is ready to respond with counter-tariffs if Trump follows through on his threats. Mexico’s Claudia Sheinbaum, meanwhile, has said her government has plans for how to respond but has not offered details.

Lula, who backed Kamala Harris in the US election, also criticized Trump for pledging to exit the Paris climate agreement and for pulling the US out of the World Health Organization, saying the moves were “a step backward for human civilization.”

It was the sharpest criticism Lula has leveled at the new US leader since wishing him a “successful term” last week. On his first day in the White House, Trump said he expected “great” relations with Brazil because “they need us much more than we need them.”

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Interest Rates and Inflation

The comments came during a wide-ranging press conference — Lula’s first of the year — in which the leftist leader discussed rising interest rates, potential diesel price increases from state-controlled oil firm Petroleo Brasileiro SA, and Brazil’s fiscal situation.

Lula reaffirmed his support for new central bank chief Gabriel Galipolo, a day after policymakers hiked the benchmark Selic a full percentage point to 13.25%. The monetary authority had signaled the move in December and plans to deliver another one-point increase in March as it seeks to tamp down inflation.

Galipolo is doing his part to deliver “the lowest inflation and lowest interest rates possible,” Lula said, adding that this week’s rate hike had come as anticipated. “I’m sure he will create the conditions to deliver a lower interest rate to the Brazilian people, as long as policy allows him to do so.”

Analysts expect inflation to remain above the bank’s 3% target through 2028 as high public spending, resilient demand and record-low unemployment drive Latin America’s largest economy.

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Surging food costs are denting Lula’s popularity, but the leftist leader said he would not take any radical measures to combat them as his government weighs its options. He also said he is not currently considering new spending cut proposals after a package of reductions failed to ease investor concerns about Brazil’s deficits and public debt trajectory at the end of 2024.

“I have no other fiscal measure,” he said. “If during the year there is a need to do something else, we will bring the government together and discuss it. But, if it’s up to me, there’s no other fiscal measure.”

Petrobras

Lula also weighed in on the possibility of diesel price increases from Petrobras, as the state-run oil company is known.

“I have not yet been notified if Petrobras will increase the price, and it does not need to notify me,” he said. “If it reaches a decision that it is important for Petrobras to make an adjustment, it should do so.”

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Shares in Petrobras, which has faced worries over government intervention in its pricing policy, gained following the remarks.

Lula also pledged to aid top miner Vale SA overcome challenges to its operations in Brazil as the company’s new management heralds the start of a closer relationship with the government. The miner wasn’t talking to the government before about hurdles in its critical minerals projects, but now is “willing to change that,” he said.

--With assistance from Beatriz Reis, Alex Vasquez and Leda Alvim.

(Adds additional Lula comments and details from seventh paragraph.)

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