The U.S. Says It Has a Tariff Deal With Brazil. Brazil Disagrees.

Posted May 2, 2018 4:39 p.m. EDT
Updated May 2, 2018 4:41 p.m. EDT

SÃO PAULO — 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 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 Donald 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,” 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 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 U.S. 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.

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.”