US President Donald Trump announced tariffs on US steel and aluminum imports from Brazil and Argentina in a measure that shocked South American officials and left them scrambling for answers, Reuters reports.
In an early morning tweet on Monday, Trump accused the two countries of engaging in “a massive devaluation of their currencies” to the detriment of American farmers, and said the tariffs were “effective immediately”.
In fact, the opposite is true: both countries have actively been trying to strengthen their respective currencies against the dollar. Analysts said the origin of Trump’s decision may lie in the domestic political consequences of his China trade war.
US farmers represent a key demographic for Trump ahead of the November 2020 election, and they have watched in vain as the trade dispute has hurt the competitiveness of US agricultural products, allowing their Brazilian and Argentine peers to get rich off China.
“For many Brazilians, this smells like revenge for their country’s soybean farmers bonanza – they have benefited enormously from the US-China trade war by replacing US soybeans sales into China,” said Kim Catechis, head of investment strategy at Martin Currie.
Representatives for the US State Department and the Office of the US Trade Representative did not respond to a request for comment.
Brazil’s President Jair Bolsonaro, an avowed Trump fan who has sought closer US ties, said he would call his US counterpart and seek mercy.
“I don’t see this as retaliation,” Bolsonaro told Radio Itatiaia. “I’m going to call him so that he doesn’t penalize us … and I’m almost certain he’ll listen to us.”
Argentine Production Minister Dante Sica said Trump’s announcement was “unexpected” and he was seeking talks with US officials. Additionally, Argentina’s Foreign Ministry said it will begin negotiations with the US State Department.
“We are trying to get more precision [about the announcement] and what impact it could have” both commercially and administratively, Sica said.
Argentina’s production ministry said the country has exported around US$520 million in steel and aluminum to the United States so far this year after exporting US$700 million in 2018. The ministry added it was working with Brazil to define a joint position and plan of action.
Trump first announced metals tariffs against Brazil and Argentina in March 2018, but they never came into force as he granted Brasilia and Buenos Aires a permanent exemption.
Monica de Bolle, a senior fellow at the Peterson Institute for International Economics, believed Trump’s tweets were an effort to pressure Brazil and Argentina into helping him with China.
“What he actually wants … I strongly suspect, is ‘we need you to reduce your exports of ag products to China’ because that’s really what’s hurting [US] farmers,” she said.
Trump’s accusation that the Brazilian and Argentine currencies were being artificially devalued was met with widespread skepticism.
The head of Brazil’s Central Bank, Roberto Campos Neto, said the Brazilian real is a floating currency and that the central bank does not target a value.
Campos Neto said in a speech in Sao Paulo that the real’s recent slide was related to disappointment in an oil auction that failed to attract big investors. Argentina put in place currency controls to steady its beleaguered peso.
Trump also urged the Federal Reserve to lower interest rates so countries “no longer take advantage of our strong dollar. Lower Rates & Loosen – Fed!”
Trump has repeatedly urged the US central bank to lower rates to below zero, but Fed policymakers have been reluctant. Fed policymakers hold their next meeting on Dec. 10-11.
In another development, the US government said it could slap additional duties of up to 100 percent on US$2.4 billion in French imports of Champagne, handbags, cheese and other products, after concluding that a new French digital services tax would harm US tech companies.
The US Trade Representative said its investigation found that the French tax was “inconsistent with prevailing principles of international tax policy, and is unusually burdensome for affected US companies”, including Alphabet’s Google, Facebook, Apple and Amazon.
US Trade Representative Robert Lighthizer said the US government was also exploring whether to open similar investigations into the digital services taxes of Austria, Italy, and Turkey.
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