Ipea: Brazil’s steel, aluminum exports to US set to fall by 11.27%
The Institute for Applied Economic Research (Ipea), affiliated with the Ministry of Planning and Budget, estimates that the United States’ 25 percent tariff on Brazilian steel and aluminum imports “could significantly impact Brazil’s ferrous metals sector.” The institute projects a 2.19 percent decline in production, an 11.27 percent drop in exports, and a 1.09 percent decrease in imports.
In absolute terms, the tariff could result in a $1.5 billion loss in exports. In terms of traded volume, the reduction could reach 1.6 million tons of steel and aluminum, according to the technical note published by the institute on Wednesday (Mar. 12).
Ipea notes that “the North American market directly accounts for more than 10 percent of the [ferrous metals] sector’s turnover. The dependence on this market is even greater for semi-finished products (slabs and ingots), as approximately 90 percent of Brazilian sales to the US are concentrated in these products.”
Minimal impact on GDP
The United States is Brazil’s main foreign market for steel, and despite the strong export figures and percentages, Ipea’s projection indicates minimal impact on other sectors.
For the economy as a whole, “the impact on Brazil would be insignificant,” the technical note states. According to Ipea, the effect could result in a “0.01 percent decline in GDP and a 0.03 percent drop in total exports.”
Although it predicts minimal effects, Ipea recommends dialogue and careful consideration in Brazil’s response. “Negotiation is certainly the best option, especially since Brazil can argue that the US has a trade surplus with Brazil.”
In its technical note, the institute also discusses potential Brazilian retaliation against the US. “Regarding possible retaliation through import restrictions from the US, we must proceed with caution and carefully assess their impact.”
Dialogue
The largest US exports to Brazil include fertilizers and nitrogen compounds, as well as coke (a fuel derived from hard coal) and coal, which together account for approximately 10 percent of total US exports to Brazil.
Ipea warns, however, that higher tariffs on these products could drive up domestic prices for these crucial inputs in agricultural production and the steel industry.
Prior to Ipea’s assessment, the Brazil Steel Institute and the National Confederation of Industry (CNI) published notes pointing out that dialog could reverse the US decision.
