Brazil Extends Steel Tariffs Amid Industry Criticism, Stocks Fall

Brazil's government announced on Wednesday that it would extend a tariff system designed to protect the domestic steel industry for an additional 12 months. However, steel manufacturers criticized the system as ineffective, leading to a decline in the stock prices of Brazilian steel companies on the same day.

The quota system, which has been in place since last year, has faced immediate criticism from the steel industry. Under this system, steel products can enter the country with import duties ranging from 9% to 16% as long as they do not exceed the import quota. If the quota is exceeded, a 25% tariff is applied.

The policy, which now covers 23 types of steel products, has previously been criticized for its broad scope. The government's statement on Tuesday maintained a policy that has also been criticized by the industry: steel imports from countries that have trade agreements with Brazil or have reached special conditions are not subject to quota and tariff restrictions.

The steel industry had previously urged the government to update the system, advocating for a uniform 25% tariff on all steel products, similar to the policies in the European Union and the United States. The Brazilian Steel Institute (Aco Brasil) reported that steel imports in the first four months of 2025 increased by 27.5% year-on-year, reaching 2.2 million metric tons. The institute did not comment on the matter on Wednesday.

On the first trading day after the policy announcement, the stock price of Companhia Siderúrgica Nacional (CSN) fell by 4.4%, Usiminas by 3.6%, and Gerdau by 1.2%. In contrast, Brazil's benchmark stock index, the Bovespa, only declined by 0.5%.

The extension of the tariff system comes at a time when the Brazilian steel industry is facing significant challenges, including increased competition from international producers and fluctuating demand. The government's decision to maintain the current system, despite industry criticism, suggests a cautious approach to protecting domestic producers while avoiding potential trade disputes.

The ineffectiveness of the current tariff system, as perceived by steel manufacturers, highlights the need for a more comprehensive and targeted approach to safeguarding the domestic steel industry. The industry's call for a uniform tariff on all steel products reflects a desire for a more straightforward and predictable regulatory environment.

The government's decision to extend the tariff system for another 12 months provides some stability for domestic steel producers, but it also underscores the ongoing challenges they face in a competitive global market. The industry's criticism of the system suggests that further adjustments may be necessary to ensure its effectiveness in protecting domestic producers while promoting fair trade practices.