Sao Paulo Prepares for 2.7% Economic Hit from Trump's Tariffs

Brazil's Sao Paulo state is preparing measures to mitigate the impact of potential 50% tariffs on exports to the US. The duties could affect 120,000 jobs and shrink the state's economy by up to 2.7%. Governor Tarcisio de Freitas said they are reaching out to US lawmakers and companies to reduce the effects. The governors criticized President Luiz Inácio Lula da Silva's handling of relations with US President Donald Trump.

Sao Paulo, Brazil's largest state, is taking proactive measures to mitigate the potential impact of a 50% tariff on its exports to the United States, which could take effect on August 1. Governor Tarcisio de Freitas announced that the state is working on measures to support affected companies, including the provision of five-year credit lines to bolster liquidity [1].

The tariffs, if implemented, could affect up to 120,000 jobs in the region and shrink the state's economy by as much as 2.7% [1]. The state government is reaching out to US lawmakers, companies, and government agents to illustrate the scale of the problem and to reduce the effects. "What worries me is the possibility of Caterpillar moving its output to other countries, the impact on a small coffee producer, the orange industry, Embraer," said Governor de Freitas, referring to local operations of US mining and farm machinery maker Caterpillar Inc. and aircraft maker Embraer SA [1].

The governors of Parana and Goias, who joined de Freitas at an event organized by XP Inc in Sao Paulo, also urged the country's government to negotiate with the US while highlighting the risks for meat and organic sugar producers. They criticized President Luiz Inácio Lula da Silva's handling of relations with US President Donald Trump [1].

The tariffs, if imposed, would be based on Trump's threat in retaliation for what he called a "witch hunt" against former Brazilian president Jair Bolsonaro. Trump has threatened the tariffs if Brazil's Supreme Court doesn't immediately dismiss coup attempt charges against Bolsonaro [1].

The Brazilian chemical industry, which exported $2.4 billion to the US last year, is also facing potential cancellations of export orders for certain resins and compounds used to make fertilizers. Andre Cordeiro, head of Brazilian chemical lobby Abiquim, said that since Trump's announcement, export orders have been canceled for these products [2].

Investors at a large financial market gathering in Sao Paulo were more concerned about the political fallout of the tariffs than the economic impact. Ruy Alves, a partner and manager at Kinea Investimentos, said that the macroeconomic impact is small and the microeconomic risks are already priced in [3].

The Brazilian public and private sectors are increasingly convinced that the tariffs will be implemented and are beginning to take steps to mitigate their impacts. Brazil is scrambling to avert the punishing tariffs, but high-level talks are stalled, and US companies are reluctant to confront Trump over the issue [4][5].

References:
[1] https://www.bloomberg.com/news/articles/2025-07-26/trump-s-50-tariff-in-brazil-may-hit-major-state-s-gdp-by-2-7
[2] https://finance.yahoo.com/news/trump-tariffs-weigh-brazil-chemical-184919381.html
[3] https://www.bloomberg.com/news/articles/2025-07-25/brazil-investors-warn-of-political-impact-of-tariffs-in-election
[4] https://www.bnamericas.com/en/features/brazil-braces-for-us-tariffs-govt-and-private-sector-mobilize-to-counter-trade-fallout
[5] https://finance.yahoo.com/news/brazil-scrambles-u-tariff-deadline-152847259.html