From Farm to Business Impasse: Trump's Tariff Hike Leaves Agribusiness in a Difficult Situation

Brazilian agribusiness faces its biggest trade threat in years with the additional 50% tariff announced by Trump, which will take effect on August 1. The measure, the highest ever imposed excluding China, puts $12.1 billion in annual exports at risk—30% of everything Brazil sells to the United States.

Coffee, beef, orange juice, and the forestry complex top the list of the most vulnerable segments. For some of them, the surcharge could mean the end of exports to the American market, the largest in the world.

A study by the FGV Center for Agribusiness Studies estimates that exports could fall by 75%, as Brazilian products would become considerably more expensive compared to those of other competitors.

High global demand for commodities could ease the situation for companies, allowing them to redirect sales to other markets, according to Rafaela Vitória, chief economist at Banco Inter. "Grains and coffee could be directed to China or other countries with high demand," says Caio Megale of XP Investimentos.

The problem is greater among more processed or specific products within agribusiness, according to UBS Wealth Management. They are unlikely to find alternative markets. Wood products are one of the items most likely to be affected.

At this point, the focus is on diplomatic negotiations to reverse, at least partially, Trump's position. The Brazilian Agribusiness Association (ABAG) says there is no economic justification for the tariffs. Brazil is an "established and reliable trading partner." The association emphasizes that the losses would not be limited to Brazilian exporters. They would also hit American consumers hard.

The National Confederation of Agriculture and Livestock (CNA) shares this view, expecting that "reason and pragmatism will prevail" in the negotiations.

Coffee: After five failed harvests, Trump's tariff hike comes

Coffee beans lead agribusiness exports to the US, the world's largest consumer. In the first half of the year, sales reached US$1.2 billion—one-sixth of the segment's foreign trade.

The Brazilian Coffee Industry Association (ABIC) fears a reduction in competitiveness and increased costs due to Trump's tariff hike. The organization suggests that the Brazilian government act strategically and diplomatically to protect the industry's interests. Maintaining the tax would be another setback for the industry, which has suffered five failed harvests.

Marcos Matos, director-general of the Brazilian Coffee Exporters Council (Cecafé), stated in an interview with CBN that diplomatic negotiations are underway in partnership with the National Coffee Association (NCA), a North American organization representing roasters, retailers, suppliers, and large corporations. The goal of the negotiations is to include coffee on a list of tariff exemptions, justifying this by the fact that the product is not produced in the United States.

Beef could lose one of its main markets abroad

The beef industry is also showing concern. The United States is among the main buyers: in the first half of the year, sales totaled $1 billion. According to the Secretariat of Foreign Trade (Secex), 12% of frozen boneless beef exports were destined for the North American market. The dependence on processed meat is higher: 65%.

The president of the Brazilian Association of Beef Exporting Industries (Abiec), Roberto Perosa, told Reuters that the tariffs would make sales to the United States unfeasible and that export contracts would have to be reviewed.

The Brazilian Animal Protein Association (ABPA) is monitoring negotiations between the two countries and notes that, although the overall trade balance is little affected, animal protein exports to the United States are important for the production chain. In addition to beef, the country also buys pork.

Brazilian companies in the sector with operations in the United States, such as JBS and Marfrig, will not be directly affected by the tariffs, as they apply exclusively to products imported from Brazil. According to Genial Investimentos, this helps minimize the impact on agribusiness companies with global operations.

Forestry complex is considering the possibility of losing a billion-dollar business

Companies linked to the forestry complex are already doing the math, considering the possibility of losing business in the United States. Companies operating in the pulp, timber, and paper industries exported $1.4 billion in the first half of the year.

The situation is more delicate in some segments. 85% of carpentry and joinery exports are destined for the world's largest economy. For profiled timber, the figure is 80%.

According to Fabio Brun, president of the Paraná Association of Forest-Based Companies (APRE Florestas), the tariff increase increases the challenges for the national forest-based industry, which already faces high costs and logistical restrictions.

He emphasizes the need for Brazil to coordinate efforts to facilitate negotiations with the United States and mitigate the impact of these measures. He also suggests that companies consider alternative plans and evaluate strategies to mitigate potential negative effects if the decision is upheld.

Trump's tariff hike could cripple orange juice sales

The 50% tariff announced by the United States could jeopardize sales of Brazilian orange juice to the American market, according to the National Association of Citrus Juice Exporters (CitrusBR). In the first half of the year, exports totaled $655 million.

The new tariff would increase the existing tax of $415 per ton by 533%, resulting in 72% of the product's value going to taxes. According to the entity, the sector does not have the margin to absorb this impact.

She points out that Brazilian companies would face difficulties in directing production to other markets. Europe currently buys 52% of Brazilian juice, but has already reduced its imports. The fear is that prices will drop sharply.

The association requests a response from the Brazilian government and recommends mobilizing diplomatic resources to protect jobs and income. The sector believes that potential negotiations could influence a review of the measure.