WASHINGTON — President Donald Trump announced plans Monday to resurrect tariffs on all steel and aluminum imports from Brazil and Argentina, stunning political and industry leaders in those countries and extending the White House’s adversarial trade tactics to new fronts.
Trump took aim at both nations on Twitter, claiming that the devaluation of their currencies was hurting American farmers, though it was unclear what specifically triggered the announcement. He then directed his attention to the Federal Reserve, which he has frequently slammed for not cutting rates.
“Brazil and Argentina have been presiding over a massive devaluation of their currencies, which is not good for our farmers,” Trump said in an early morning tweet. He added that the U.S.’s central bank should “act so that countries, of which there are many, no longer take advantage of our strong dollar by further devaluing their currencies. This makes it very hard for our [manufacturers] & farmers to fairly export their goods. Lower Rates & Loosen — Fed!”
The surprise announcement came after it appeared as though the White House was preparing to dial back its aggressive trade approach in the lead up to next year’s election. The administration appeared close to a deal with House Democrats to revamp the North American Free Trade Agreement, and tensions with China had eased in recent weeks. Trump’s tweets were not accompanied by any announcement from the Commerce Department or the U.S. Trade Representative announcing the change more formally.
The tariffs took aim at one of the most vital industries in Brazil at a particularly vulnerable moment. Unemployment is above 10 %, and the economy has stalled. The steel industry, long one of the nation’s economic engines, has been looking increasingly wobbly as well, slashing growth projections earlier this year.
Brazilian steel exports to the U.S. accounted for roughly $2.6 billion last year — making the United States one of Brazil’s biggest markets for steel — and analysts expected the tariffs to be painful.
In Argentina, where steel and aluminum exports represent roughly $700 million, the unexpected news comes as the nation is undergoing a transition of power. If the tariffs persist, they will be one of the earliest diplomatic tests to face the incoming presidency of Alberto Fernández, a leftist politician who will take office within a week.
Before leaving the White House for a trip to a NATO gathering in London, Trump told reporters he had given Brazil and Argentina “a big break on tariffs, but now I’m taking that break off.”
“It’s very unfair to our manufacturers and very unfair to our farmers,” Trump said. “Our steel companies will be very happy, and our farmers will be very happy.”
In Brazil, the tariffs announcement stunned officials, who for nearly a year have sought to develop closer ties with the United States, particularly Brazilian President Jair Bolsonaro. Nicknamed by some as the “Trump of the Tropics,” Bolsonaro has repeatedly praised Trump, mimicked his rhetoric, and even tried to install his son as the ambassador to the United States.
But on Monday, Bolsonaro appeared taken by surprise.
“I’m going to speak with Paulo Guedes,” he told several reporters outside the presidential palace, referring to the country’s finance minister. “Aluminum? I’m going to speak with Paulo Guedes now . . . If necessary, I’ll call Trump. I have an open channel with him.”
Later in the day, the Brazilian foreign ministry issued a statement saying it “acknowledged President Trump’s declaration over the possible imposition of tariffs” and that the government was in touch with officials in Washington.
“The Brazilian government will work to defend Brazilian commercial interests and facilitate commerce with the United States, with a view to widen the commercial exchange and deepen the bilateral relationship, to the benefit of both countries,” the statement said.
The news was met by confusion in the Brazilian steel sector. The Brazilian Steel Institute, which represents most of the country’s steel companies, said it was “perplexed” not only by the tariffs but by Trump’s accusations that the government was trying to artificially devalue the Brazilian currency.
“The exchange rate in the country is free,” the institute said in a statement. “The decision to tax Brazilian steel as a way to ‘compensate’ the American worker is a retaliation against Brazil and not consistent with the partnership between the two countries.”
Trump’s tweets also referenced Wall Street’s gains — “U.S. Markets are up as much as 21% since the announcement of Tariffs on 3/1/2018,” he wrote — suggesting he’s not too concerned about a market blowback if he ratchets up trade tensions.
David Wessel, director of the Hutchins Center on Fiscal and Monetary Policy at the Brookings Institution, said the markets have been hopeful that the trade war may soon end, making the timing of Trump’s announcement all the more surprising.
“Rattling the trade war saber, which may play well with his base, seems to me like it is likely to hurt the markets,” Wessel said.
By midmorning Monday, the major U.S. indexes were in negative territory: The Dow Jones Industrial Average was off roughly 0.7%; the Standard & Poor’s 500 was 0.7% in the red; and the Nasdaq Composite was down roughly 1%.
Trump later praised Bolsonaro for “working very hard on the Amazon fires and in all respects doing a great job for the people of Brazil.”