It didn’t take long for the market to react to Donald Trump’s tariff announced on Wednesday (2). The decision to impose staggered tariffs on products from countries with large commercial deficits with the United States triggered a strong risk aversion in global markets, especially with the dollar.
Amid the fear of recession, the US currency plummeted 1.71%, being quoted at R $ 5,601, around 1:20 pm GMT, following the drop in the yield of ten -year American Treasury titles and a dive from the values around the world. The devaluation of the exchange rate draws the pessimism of investors, who already anticipate a scenario of economic stagnation with inflation, which increases the perception of risk and gives breath to a search for assets considered safer.
Experts say that instead of adopting a reciprocal policy – where the United States would apply rates equivalent to those imposed by other countries – the government has chosen to target products from regions that maintain large commercial surpluses with the US. This mainly includes Nations from Asia, such as China, Vietnam and Taiwan, as well as European countries such as Germany and Ireland.
Thus, Asian products have over 30%surcharge, while tariffs for European products reach 20%. Latin America, in turn, has suffered milder rates, as the United States maintain commercial surplus with most countries in the region.
The universal rate of 10%, which excludes certain products, will come into force on April 5, while the highest reciprocal rates for partners will be implemented on April 9. China and the European Union promised to respond with retaliatory measures.
According to Paulo Gala, chief economist at Banco Master, the measure is economically counterproductive and tends to cause more distortions than gains. “The idea of protecting American industry may end up causing stagflation: a combination of low economic growth with high inflation. Production costs in the United States are much higher than in Asia, and a simple tariff imposition will not be able to reverse this reality,” says the expert.
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He points out that in a globalized scenario, many multinationals that produce in Asia or Europe are reconsidering their investments and expansion plans, as change in the tariff regime increases the cost of production and generates insecurity about the economic viability of maintaining operations outside the United States.
Brazil, which was taxed by 10%, was relatively spared from this aggressive policy, receiving the smallest rates due to the small commercial surplus with the US. However, experts say that the indirect impact may be stronger, especially for exporting sectors and productive chains that depend on imported inputs.
In addition, it comes to this concern about the reflexes in Brazilian agribusiness, which can both gain competitiveness in Asian markets – if China and other countries choose to retaliate the United States with tariffs on US agricultural products – as well as suffering from reducing global demand in a recession context.
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Gala says that despite a momentary scenario of real -dollar appreciation, driven by the devaluation of the American currency, Brazil remains vulnerable to the oscillations of international trade and external political decisions that can directly affect its economy.
“The dollar was the big loser of last night’s events,” said Sonja Marten, chief of monetary policy and exchange rate research at DZ Bank AB in Frankfurt, in an interview with Bloomberg TV. “People are now focusing on the economic consequences these tariffs can have about the US.” Investors, already pessimistic about the dollar, now predict new cuts in interest rates by the Federal Reserve (Fed), with swaps indexed at night indicating a 80% reduction chance by June.
Crisis of confidence crisis in the dollar strengthens, according to Bloomberg, especially after Deutsche Bank warn of a possible “broader confidence crisis.” Analysts evaluate that economic slowdown in the US represents a greater threat than increased inflation, which pressures the Fed to adopt a more aggressive posture in monetary policy. Meanwhile, Citigroup Inc strategists recommend a bet on the euro, projecting that the European currency reaches $ 1.15 in the coming months, considering that tariffs should more impact American corporate profits than Europeans.
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Why did the real work well?
The Index dollar, which measures the strength of the American currency against a border basket, retreated 2% and reached 101.6 points, while the euro, the Swiss Franco and the Japanese yen showed strengthening. On the other hand, commodities recorded a strong drop, with oil falling more than 4%.
Despite this risk aversion movement, Real surprised by opening up, while Mexican weight followed the downward trend. Leonel Mattos, Stonex’s market intelligence analyst, says that this positive reaction from the Brazilian currency is linked to the fact that Brazil has been in a relatively more favorable position compared to other countries. The tariffs applied to Brazil were 10%, while South Africa and Europe face 20%rates and China, 54%. This difference places Brazil in competitive advantage, especially in terms of exports.
Still, Mattos points out that the scenario remains volatile and requires caution from investors. The dominant perception in the markets is that Brazil can be less impaired than other economies, which favors low exchange rates in the exchange rate and strengthens Brazilian assets in the short term.
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José Faria Júnior, from Wagner Investimentos, advises importers to maintain hedge strategies to the semester, avoiding excessive exhibitions, but seeking to adjust the protection cost as US currency retreats.
For exporters, he notes that it was possible to sell dollars in the last days between the blue and red lines, taking advantage of the rise movement from currency to the monthly PTAX. At the moment, the expert’s guidance is to maintain caution and wait for new sales opportunities, as the market is outside the ideal point for commercialization.
All appropriate measures
President Lula (PT) said on Thursday (3) that Brazil “respects all countries, from the poorest to the richest, but requires reciprocity” and stressed that protectionism is no longer in the modern world.
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Lula assured that the government will take all appropriate measures to protect companies and national workers, using the reciprocity law approved on Wednesday (2) by the National Congress and the WTO (World Trade Organization) guidelines.
During the Brazil event around, organized by the government, Lula stressed that Brazil does not submit to any foreign flag. “It does not continence for any flag other than the green and yellow flag,” he said.
The Reciprocity Law, recently approved by Congress, establishes the application of commercial and environmental rules equivalent to those adopted by countries that impose barriers to Brazil. The project was sanctioned shortly after the announcement of US tariffs, which foresee a 10% rate for Brazilian products and 25% for automobiles, steel and aluminum exported to the US.
The position of the Brazilian government has been marked by the defense of multilateralism and repudiation of economic protectionism. Lula, who recently said he had no problem dialogue with Trump to avoid a commercial confrontation, has sought to strengthen international alliances that support fair and balanced trade.
Brazilian retaliation, however, will depend on the analysis of economic and legal impacts, as the strategy adopted wants to ensure protection to national sectors without harming current trade agreements.
Meanwhile, the market is still aware of the US economic data, including the PMI Index of Services, which can offer a panorama of the sector amidst new tariffs. However, Mattos explains that this indicator tends to have less weight in the face of the magnitude of commercial changes that impact the global scenario.
The expectation for the coming days is that countries affected by tariffs react in different ways, some seeking negotiations to obtain exceptions or reductions from the White House, while others prepare retaliation. This is why analysts recommend attention to the next few hours, as retaliation and negotiations from affected countries can quickly change the dynamics.