From the perspective of the White House, the United States
had negotiated a preliminary deal with Brazil, as well as Argentina and Australia, to
exempt the countries from punitive steel and aluminum tariffs.
From the perspective of Brazil, it was issued an ultimatum.
Brazil accused the Trump administration on Wednesday of breaking off
negotiations over the tariffs last week and issuing a take-it-or-leave-it offer.
According to the Brazilian authorities, the United States said the country’s steel and
aluminum industries could opt for tariffs or quotas.
That account appears to contradict the White House’s version of the events. On
Monday, White House officials said they had reached agreements in principle with
Argentina, Australia and Brazil with regard to steel and aluminum, saying the details
would “be finalized shortly.”
The disconnect between the United States and Brazil echoes the broader state of
the trade negotiations, which have been clouded by confusion, miscommunication
and a general state of uncertainty over the rules of engagement.
When President Trump issued the worldwide tariffs in March, he granted
temporary exemptions to Brazil, Argentina, Australia, Canada, the European Union,
Mexico and South Korea. Almost immediately, countries scrambled to make them
permanent.
Just hours before those exemptions were set to expire, the Trump administration
extended the deadline for the European Union, Canada and Mexico. It also said
Brazil, along with Argentina and Australia, were finalizing the details of “satisfactory
alternative means” to address national security threats posed by steel imports and
avoid tariffs. (South Korea had previously reached an agreement as part of a broader
trade deal.)
Apparently, Brazil wasn’t exactly on board.
In a joint statement on Wednesday, Brazil’s foreign and trade ministers said
they were informed of the decision by the United States to break off negotiations last
Thursday. They were then told that the temporarily suspended tariffs would be
applied “immediately” or, as an alternative, they could opt for “restrictive unilateral
quotas.”
The White House did not immediately respond to a request for comment.
The president of the Brazil Steel Institute, Marco Polo de Mello Lopes, who was
meeting with Brazilian officials when they got the call from Washington, said the
ultimatum came as a complete surprise.
“They said the decision was made on the eve of a presidential meeting, that the
political conditions had changed, and there were no longer the conditions to keep
negotiating as we had been,” Mr. Lopes said in a conference call with journalists on
Wednesday. “Take it or leave it isn’t the way you treat a partner.”
In the statement, Brazil said that if it ultimately had to choose, its aluminum
industry would prefer the 10 percent tariffs on its exports to the United States while
its steel business favored import quotas to the 25 percent tariffs. But the Brazilian
authorities said they would like to keep negotiating.
Brazil has argued that 80 percent of its steel exports to the United States are
semifinished products used in the steel industry and therefore do not pose a threat.
Officials have also noted that Brazil is the largest importer of American metallurgical
coal, worth about $1 billion in 2017, which is used in Brazil’s steel industry.
Days before talks were broken off, Thomaz Zanotto, a consultant for Brazil’s
second-biggest steel company, CSN, who had been kept abreast of negotiations, said
it appeared that Brazil might have to face quotas on finished products, which
represent 20 percent of exports to the United States. But they believed at the time
the rest would be exempt.
Mr. Lopes said the quotas being offered by the United States in lieu of tariffs
would mean a 7.4 percent reduction in the exports of semi-finished steel products
and a drop of between 20 percent and 60 percent in exports of finished goods,
depending on the product.
In its statement, Brazil said the United States would be solely responsible for
putting the measures in place. The ministers “lamented that the negotiating process
had been broken” but said they were open to “building solutions that are reasonable
for both parts.”