While the ongoing trade discussions between the U.S. and China continue to take up the majority of the financial press’s attention, another potential deal could be in the works on the other side of the globe.
President Donald Trump went on to say on Tuesday that he will be pursuing a trade deal with Brazilian president Jair Bolsonaro that would help lower trade barriers between the largest economies on each American continent.
“We’re going to work on a free trade agreement with Brazil,” said the President to reporters at the White House. “Brazil is a big trading partner. They charge us a lot of tariffs, but other than that, we love the relationship.” The possibility of a deal was raised when U.S. Secretary of Commerce Wilbur Ross addressed business leaders in the Brazilian capital of San Paulo ahead of a Wednesday meeting with the Bolsonaro. “It’s important not to put roadblocks in the way of a US-Brazil free trade agreement that inadvertently might be brought up in the transaction between Mercosur and the EU,” Ross told journalists in Sao Paulo. “We have issues about standards in autos, pharma, chemical, food and a whole bunch of areas.”
At the same time, Brazil’s deputy economy minister of foreign trade, Marcos Troyjo, told Reuters that the South American country had “ambitious” goals to boost investment between the two countries, especially in the area of infrastructure. However, Troyjo added that any talks about tariff reductions would have to include Brazil’s partners Agentina, Uruguay, and Paragauy, which form the Mercosur trade union.
Both the U.S. and Brazil have powerful agricultural sectors domestically, and these industries have sometimes found themselves at odds with each other. The last time this happened was five years ago, when a dispute over cotton subsidies had to be resolved at the World Trade Organization back in 2014.
The United States has already gone to threaten raised steel and aluminum tariffs on Brazil as well as a number of other countries as part of President Trump’s “America First” strategy, although later granted a permanent exemption to Brazil. At the same time, Brazilians have pushed for greater access to America’s sugar market while also asking that U.S. authorities lift a 2017 ban on fresh Brazilian beef imports to the country.
Perhaps one of the biggest sectors that could benefit from reduced tariffs would be Brazil’s coffee industry. Specifically, farmers in the nation have been struggling to make profits, with many opting out and selling their farms altogether.
Coffee farmers have traditionally received the short end of the stick, seeing little in terms of the significant profit margins enjoyed by major coffee retailers in the states. 2019 has been a particularly difficult year, since coffee output follows a two-year cycle of high and low output, giving coffee trees a chance to recover.
Experts have warned that if something doesn’t change soon, a mass exodus of coffee farms could result in a significant drop in global supplies, despite the fact that output has reached record highs.
At this point, a trade deal between Brazil and the U.S. seems highly likely and will be for the most part void of the drama seen with the ongoing China trade talks.
