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Brazil is to slash import duties on foodstuffs ranging from sugar to sardines in a bid to control rapidly rising prices, running counter to Donald Trump’s protectionist onslaught and the spectre of trade wars it has invoked.
Latin America’s largest economy said it would eliminate border levies on nine “essential” items as increasing supermarket bills eat into the popularity of leftwing president Luiz Inácio Lula da Silva.
Vice-president Geraldo Alckmin, also minister for industry and trade, said the changes would take effect within days. “The government is waiving taxes in favour of price reductions,” he added on Thursday evening. “It won’t harm the producer but it will benefit consumers.”
Duties will be reduced to zero for meat, which is currently subject to a 10.8 per cent border tax; coffee, currently at 9 per cent; sugar, now at 14 per cent; corn, now at 7.2 per cent; sunflower oil, from 9 per cent; olive oil, from 9 per cent; sardines, from 32 per cent; biscuits, from 16.2 per cent and pasta, from 14.4 per cent. An import quota for palm oil will more than double.
Economists were sceptical about the impact because of Brazil’s position as a top global producer and exporter of agricultural commodities such as coffee, beef and sugar, but also because extreme weather events had affected some domestic production.
“Most of these items are produced and supplied nationally, save a few exceptions like olive and palm oil,” said Felipe Camargo, economist at Oxford Economics, who calculated the total import value of the targeted foodstuffs at $15bn. “[It is] a political ruse to convince the electorate the government is trying to address rising grocery prices.”
William Jackson, chief emerging markets economist at Capital Economics, said an import surge was unlikely.
“We might see a bit of a decline [in] food inflation as a result. But there are more fundamental drivers of this spike in prices, particularly in beef and coffee, [such as] drought and fires,” he added.
The move forms part of a wider package by Brasília aiming to make food cheaper for the population of 213mn. It underlines pressure on Lula, a former trade unionist who previously governed between 2003 and 2011, halfway through his four-year term.
Despite robust GDP growth and low unemployment, pollsters say the 79-year-old’s ratings have suffered from stubborn inflation, which at an estimated annual 4.96 per cent in February was above an official target ceiling of 4.5 per cent. Food and drink prices rose an estimated 7.12 per cent in the year to February.
Jackson said there were signs that grocery trips may become even more expensive in Brazil: “If you look at agricultural commodity prices and take account of usual lags, they point to food inflation of as much as 15 per cent in the next six months or so.”
The loosening of certain import barriers by Brazil, a traditionally closed and protectionist economy, comes as US President Trump’s border duties on imports from China and threats of widespread tariffs on goods from Mexico and Canada — and the retaliatory tariffs that China and Canada have imposed — raise fears of a full-blown trade war.
Trump specifically mentioned Brazil as a country charging tariffs on US goods this week, so Brasília’s levy reductions may help future negotiations with the Trump administration, some analysts argued.
“The food inflation problem is global, and in our opinion it will become more relevant in some emerging markets and in the US due to Trump’s trade policy and tariffs in the coming months,” said Cristiano Oliveira, chief economist at Banco Pine.
Additional reporting by Beatriz Langella
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