𝐓𝐫𝐮𝐦𝐩 𝐚𝐧𝐝 𝐭𝐡𝐞 𝐓𝐚𝐫𝐢𝐟𝐟 𝐒𝐡𝐨𝐜𝐤: 𝐖𝐡𝐨 𝐑𝐞𝐚𝐥𝐥𝐲 𝐏𝐚𝐲𝐬 𝐭𝐡𝐞 𝐏𝐫𝐢𝐜𝐞?

 To my dear teach who lives in Atlanta.

   Starting on August 6 (and no longer on August 1), the heavy tariffs Trump imposed on Brazil will take effect. Today, U.S. Secretary of Commerce Howard Lutnick said something along the lines of: “Japan will pay 10%, the European Union 15%, and Brazil 50% in tariffs.”

This is more political rhetoric than real economics. No country trading with America will pay more. This is the amount of import tax that American importers will pay to the government on goods purchased abroad.

The U.S. importer pays the tariff at the border. To avoid reducing profit margins, they pass it on—partially or entirely—to the final consumer. In theory, it is the American consumer who ultimately bears the cost. This means that, although the official narrative is about “punishing” exporting countries, the immediate effect is inflationary within the U.S. economy itself, eroding households’ purchasing power.

If the importer cannot pass on the full cost—because consumers may stop buying—they absorb part of the loss or reduce sales. That’s where the impact hits the exporting country: fewer exports, therefore less revenue. In some cases, the foreign exporter lowers prices to avoid losing market share, sharing the loss. Here lies a paradox: while the U.S. claims to protect domestic producers, it may end up only creating turbulence in global trade flows.

Not surprisingly, some American importers have already vowed to take the matter to court, arguing that there is no economic justification for such a massive tariff, given that the United States maintains a $7 billion trade surplus with Brazil. In their view, the decision is purely political and violates the principles of free competition and international agreements.

To better understand, let’s look at some concrete examples. Brazilian coffee, which accounts for about 30% of U.S. coffee consumption, generated $2 billion in 2024 in the American market alone. With a 50% tariff, costs for U.S. roasters will soar, and consumer prices—already up nearly 9% in 2025—are set to climb further.

Small Brazilian farmers, who already operate on thin margins, are left breathless, and the competitiveness of Brazilian coffee in the world’s largest market collapses. Importers will likely turn to suppliers such as Colombia or Vietnam—forcing Brazil to chase other markets at high cost and with no guarantee of success.

The story is similar for beef. In the first half of 2025, Brazil exported about 181,000 tons to the U.S., generating $1 billion—around 12% of its total beef exports. After the tariff announcement, shipments plunged: from 47,800 tons in April to just 9,700 tons in July—a drop of more than 80%. The 50% tariff stacks on top of existing duties, bringing the total burden on Brazilian beef as high as 76%. Losses in the second half of the year are estimated at up to $1 billion, with risks tripling in 2026. U.S. importers are expected to increase purchases from countries like Australia and Mexico, while Brazil attempts to divert volumes to the Middle East and Asia—but with no guarantee of price or market share.

Whenever citrus crops in Florida or California are hit by problems, orange juice prices in Brazil rise because exports surge, reducing domestic supply. With this tariff shock, the opposite occurs: more supply at home, but fewer dollars entering the country, putting pressure on the Brazilian real.

Ultimately, tariffs of this kind are more political weapons than sustainable economic policy. They may please certain voters in the short term but undermine international trust and harm the U.S. economy. The immediate gain lies in revenue collection and political messaging. But as the coffee and beef examples show, losses tend to far outweigh the gains.

As Nobel laureate economist Paul Krugman has warned, the plan is “grotesquely illegal” and based on the false claim that the U.S. government would not pass tariffs on to consumers. According to him, “no one has profit margins to absorb this”, and once it’s clear the policy is here to stay, “it will ultimately be the American consumer who pays.” (wunc.org, Reuters).

There is, therefore, no real gain for U.S. GDP growth. The measure does not sustainably boost domestic production: it makes imports more expensive, cuts consumer purchasing power—which accounts for about 70% of U.S. GDP—and raises costs for companies reliant on imported inputs. The net result is negative: more inflation, less consumption, and lower investment, which erodes potential GDP.

Until August 6, everything could still change—and Brazil’s reciprocal response, promised by its government, is yet to come. It is also worth noting that 694 products were left out of the tariff list, leaving room for negotiations. What seems impossible, however, is the notion that an amnesty for Bolsonaro—allegedly demanded by Trump—could be used as a bargaining chip to stop the tariff plan. It would be naïve for Brazil to even consider this without any guarantee—especially since, with or without amnesty, the tariffs were coming anyway.

Meanwhile, Brazilians can, at least for now, enjoy lower domestic prices. Ironically, it was Trump who ended up helping Lula fulfill a campaign promise: cheaper steak for the barbecue. Now we’re only waiting for beer prices to drop.

 

Cláudio Nogueira