To protect itself against Chinese competition, Brazil taxes its main trading partner

Brazil recently followed the example of other countries and decided to tax its main trading partner, China, and in particular its steel resold to Brazil. The country is trying to face increasingly tough competition.

Brazil recently followed the example of other countries and took protectionist measures: beyond a certain quota, steel will now be taxed at 25%. It must be said that Chinese steel flooded the Brazilian market in 2023. However, the subject is delicate: China is Brazil’s largest trading partner.

It is therefore impossible to enter into too harsh a confrontation, as these customs measures only affect eleven products in the steel sector, when manufacturers were hoping for triple that number. It is not certain that this will be enough, but the government could not sit idly by while the sector is in deep crisis and cannot align itself with Chinese prices. Brazilians export iron, which China uses to produce steel, which is then resold to Brazil. Last year, a large company laid off 700 workers, then suspended the activities of one of its factories for five months, in order to avoid its closure.

The steel sector is not the only one affected, but it is the most threatened. Steel is one of the bases of the Chinese economy, which produces too much and is looking to sell off its stocks. With the customs barriers erected by the United States, the country has had to find new outlets to avoid the crisis.

But the avalanche of Chinese products worries other sectors, according to Mauricio Santoro, a professor at the State University of Rio de Janeiro, those “that are labor-intensive and do not use a lot of technology, such as the textile, shoe or toy industries.” “Traditionally, these sectors are very critical of China and put a lot of pressure on the government and Congress to adopt protectionist measures,” adds Mauricio Santoro.

This explains the recent decision, which has been much talked about here, to tax online products sold for less than $50. While the idea is to protect the textile sector from Chinese competition, the measure is very unpopular, because it increases the price of products that were often favored by the less well-off classes.