Brazil’s chemicals likely to avoid higher tariffs as bilateral trade favors US – Abiquim

SAO PAULO (ICIS)–Brazil’s chemicals producers are confident the sector would be mostly spared from potentially higher US import tariffs as the latter maintains a clear trade surplus in bilateral commerce, the country’s trade group Abiquim said to ICIS.

In fact, given the clear advantage in bilateral trade, Abiquim said that instead of tariffs they may need to prepare for the US to “facilitate” chemicals trade with Brazil, a net importer of chemicals.

Earlier this week, US President-elect Donald Trump mentioned Brazil for the first time as a potential target for higher tariffs because, he argued, Brazil’s import tariffs on US goods are much higher than the other way around.

In a written response to ICIS, Abiquim said it “understands” that countries may impose “legitimate emergency tariffs” as a short-term remedy to trade distortions caused by “unfair” imports.

It could not be otherwise, after the trade group lobbied hard during 2024 – and successfully achieved – for the Brazilian government to hike import tariffs for a wide of chemicals, as domestic continued losing market share to imports.

“We will monitor the eventual developments of this recent [Trump] announcement, especially given the fact that Brazilian chemical products do not have predatory potential in the US market,” said Abiquim.

“In other words, we do not expect the imposition of barriers on Brazilian chemicals, but rather more facilitation. Since the chemical balance is clearly favorable to the US, we do not foresee significant restrictions on US imports of chemicals [from Brazil].”

The US-Brazil bilateral trade in chemicals has clearly been favoring the US in the past few years, after the country’s shale gas boom made it a net exporter of petrochemicals.

According to figures by Brazil’s foreign trade chamber Comex and compiled by Abiquim, Brazil’s trade deficit in chemicals with the US stood at $7.4 billion in 2023.

The figure was lower than in 2022 as imports from Asia, mostly from China, increased during the year, but Brazil’s deficit with the US still represented a big chunk of Brazil’s chemicals imports deficit during that year, which stood at $47 billion.

Brazil trade with US	Imports		Exports		Surplus/deficit
	2023	2022	2023	2022	2023	2022
Chemicals In ‘000 dollars	9,873,319	11,946,685	2,472,086	2,907,413	-7,401,233	-9,039,272
In tonnage	7,016,919	7,809,290	2,193,470	2,483,008	-4,823,449	-5,326,282

According to figures from the US government, US exports of goods and services to Brazil stood at $37.9 billion in 2023, down more than 25% from 2022, although still an overall trade surplus as Brazil exported to the US goods and services worth $36.9 billion, down 2% percent from 2022.

In total, the bilateral trade value stood at $74.8 billion in 2023.

“The US purchased a record $29.9 billion in manufactured products from Brazil in 2023, accounting for 81% of total US imports from Brazil, reaffirming the US as the top destination for Brazilian value-added goods,” said the US government.

Key industrial Brazilian exports to the US included semi-finished iron and steel products, aircrafts and aircraft parts, and civil engineering equipment, it added.

POTENTIAL RETURN OF GSP PROGRAM
Moreover, Abiquim said it is expectant to see if the US Congress renews the Generalized System of Preferences (GSP), a program which provided duty-free treatment for thousands of products from designated beneficiary countries and territories (BDCs), mostly developing countries.

At the height of the Cold War in the 1970s, the GSP was designed to increase trade with developing countries. The duty-free trade applied both ways, with US companies who purchased under the program exempt from import tariffs.

The GSP was authorized by the Trade Act of 1974 and implemented in 1976 but expired in 2020 and is currently pending US Congressional action for renewal.

“It is essential to bear in mind that Brazil does not apply discriminatory tariff barriers against the US in the chemical sector and, on the other hand, with regard to access to the US market, Abiquim awaits with great expectation the reactivation of the US tariff benefits program [US-GSP],” it said.

“[Its reactivation] will reinvigorate the entry with lower import taxes into the US of several chemical products originating in Brazil which would benefit from the regime.”

The US’ chemicals trade group the American Chemistry Council (ACC) and Brazil’s industrial trade group CNI said to ICIS they would not comment at this stage on Trump’s Brazil remarks.

The US’ trade groups the American Fuel & Petrochemical Manufacturers (AFPM) and the Society of Chemical Manufacturers & Affiliates (SOCMA) had not responded to a request for comment at the time publishing.

Front page picture: Chemicals facilities in Brazil
Source: Abiquim

Focus article by Jonathan Lopez