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Tariff War: An Investment Opportunity and the Future of Brazil
- LUAN SANCHES DA GAMA
- Feb 17
- 7 min read
Updated: May 2
How Brazil Can Benefit from the Trade War
Luan Sanches da Gama | Economist
The trade war between the United States and China, which escalated in 2018 during the Trump administration, led to a wave of bilateral tariffs that reshaped global trade flows. After the imposition of severe tariffs on Chinese goods, investor attention turned to Latin America as a major commodity exporter. Under what is now being called "Trumpnomics 2.0", the sharp reduction in U.S. imports from Chinese suppliers has prompted a search for alternative sources to meet global demand.
In this context, Brazil emerges as a potential winner of the trade conflict. One key reason is that it faced relatively low bilateral tariffs from the U.S.—around 10%, to be precise. Another factor is Brazil’s growing prominence in agricultural production and export quality, driven by cutting-edge farming technologies. Much of this progress stems from public-private cooperation through EMBRAPA (Brazilian Agricultural Research Corporation), which, since the 1970s, has played a crucial role in Brazil’s agricultural productivity leap.
I. Biome and Productivity
Brazil’s comparative advantage is substantial—but it was not achieved naturally. In the early 1980s, the region now known as the Brazilian Midwest (Centro-Oeste) was widely regarded as unsuitable for farming, largely due to the dominant biome in the area: the Cerrado. It is remarkable that this very biome has become the engine of Brazil’s agricultural output, producing soybeans, corn, sugarcane, and other key crops.
The Cerrado’s soil is naturally acidic (low pH), nutrient-poor, sandy, and subject to long periods of drought. Nevertheless, through the use of advanced agricultural technologies, Brazil managed to transform what was once unproductive land into the backbone of its export economy.
Across the world, agricultural revolutions have typically focused on moving planting technologies to regions that were already relatively productive. Countries like Japan and the United States concentrated their efforts on lands with inherent fertility and farming potential. Brazil, however, took a different path—leveraging technology to reshape the inhospitable landscape of the Midwest into a global agricultural powerhouse.
In this context, a key point is how Brazilian soybeans have entered the international competitive arena. In 2018, Brazil exported a record ~82.5 million tons of soybeans, up from ~68 million tons the year before. This ~22% increase was driven primarily by Chinese demand after a 25% tariff was imposed on U.S. soybeans. In 2025, the pattern continues, as China anticipates trade constraints by securing millions of tons of Brazilian soybeans for delivery in the coming months.
Indeed, in trade wars, few emerge as true winners. Paul Krugman, Nobel Prize winner in Economics (2008), has shown in his theoretical models that comparative advantage and free trade remain the most efficient response to trade tensions. In practice, commercial disputes are only truly resolved through competition—between sectors, through price, quantity, and quality of goods and services. Still, while international trade theory offers strong microeconomic foundations, the modern global economy inevitably creates both winners and losers. In the case of global commodities, those losers are often found in the U.S. and China—both producers and consumers—while Brazil finds itself seizing a rare window of opportunity for growth.
II. Exports to China
Brazil’s bilateral trade relationship with China has been a key driver of growth for both countries. While Brazil exports low-cost commodities, China returns the favor in the form of technology and capital, fostering sustainable trade and mutual economic development. Nonetheless, Brazilian economists aligned with the New Developmentalism school argue that, in the long term, Brazil must move beyond simple commodity exports and shift toward global leadership in clean energy and low-carbon food products to achieve true economic sophistication.
Over the past few decades, China has become the main destination for Brazilian commodity exports, particularly in agriculture. In 2024, China remained the top market for Brazilian agribusiness, accounting for 30.2% of the sector’s export revenues. Agribusiness sales to China totaled US$49.7 billion in 2024—a 17.5% decline compared to 2023. This drop is largely attributed to falling international grain prices and reduced Chinese demand for certain products. Even so, China continues to outpace other major destinations, such as the European Union (14.2%) and the United States (7.4%), in its purchases of Brazilian agricultural goods.
Geopolitically, Brazil’s position as a reliable supplier has gained prominence amid rising global tensions. The trade war climate between the United States and China—marked by mutual tariffs and restrictions—has led China to increase its purchases of Brazilian commodities to secure its supply chain. The uncertainty in international trade has propelled Brazil as a strategic alternative for China, thanks to strong bilateral relations and Brazil’s ability to meet the country's high demand.
III. 2025 e suas projeções
According to BrasilAgro, the outlook for 2025 is one of growth. The 2024/25 Brazilian soybean harvest is expected to be a record, estimated at approximately 167 million tons—a 13% increase over the previous season. This surge is likely to boost China’s share to as much as 78% of Brazil’s soybean exports.
When it comes to corn, the sharp fluctuations in Chinese corn purchases reflect China’s strategy to diversify suppliers and increase domestic self-sufficiency. During years of tension with the U.S. or crop failures in other countries, Brazil emerges as a key supplier—such was the case in 2023, when Beijing leveraged Brazilian supply to fill gaps. In 2025, the intensification of the trade war could once again make Brazilian corn an attractive option if China imposes restrictions on U.S. corn. For instance, at the beginning of 2025, China nearly eliminated its corn imports from the United States—opting instead to prioritize domestic consumption and alternative partners.
In addition, market access negotiations are underway for Brazilian corn by-products (such as corn meal) in China, which could open up new value-added opportunities for Brazil. In short, Brazil is positioning itself as a “buffer supplier” of corn to China: ready to fill shortages when other suppliers fall short, though still subject to shifts in Chinese agricultural policy.
As for beef exports, Brazil continues to lead the way. Unlike corn and soybeans, Brazilian beef exports increased in 2024, reaching 1.326 million tons (including both fresh and processed beef). This figure represents a 9.8% rise compared to 2023. Expectations for 2025 point to even greater expansion of exports to Asia—this time not limited to China. In the first quarter, Brazil signed an agreement with Vietnam that positions it as a hub for meat exports across the entire Asian region.
This dynamic is already reflected in Brazil’s exchange rate. Since Trump announced stricter measures against China, the Brazilian real has appreciated by 5.97% against the U.S. dollar. Despite facing fiscal crises and institutional instability, the country has demonstrated resilience in managing its external accounts. However, market enthusiasm alone may not resolve Brazil’s internal challenges.
Since 2013, Brazil has faced persistent fiscal deficits, with over 90% of its public budget locked into mandatory spending. In addition, high real interest rates have contributed to sluggish economic growth. As of April 2025, Brazil’s nominal interest rate reached 14.25%, while inflation—above the 3% target—stood at 5.48%. This macroeconomic structure has eroded the country’s credibility, even as it rides the wave of a favorable export cycle.
IV. Brazilian minerals
Unlike agricultural commodities, the value of Brazil’s mineral exports has been driven primarily by international price fluctuations.
In 2024, iron ore prices declined compared to 2023, reflecting reduced profit margins in China’s steel sector and global supply adjustments. In the first quarter of 2025, for example, despite higher export volumes, the total value of iron ore sales to China fell by 25%, reaching US$3.9 billion for the quarter. This decline in revenue occurred despite similar production levels, driven mainly by falling prices.
Iron ore extraction in Brazil is concentrated in two major regions: the Quadrilátero Ferrífero (Iron Quadrangle) in the state of Minas Gerais, and the Carajás mineral province in the state of Pará. The company Vale S.A. dominates the sector—accounting for 76% of Brazil’s iron ore exports to China in 2023.
Even amid signs of an economic slowdown in China in 2024, demand for iron ore remained strong, supported by infrastructure and construction stimulus measures introduced by Beijing. Brazil, in turn, has positioned itself as a reliable long-term supplier. Sino-Brazilian partnerships now include Chinese investments in medium-sized Brazilian mining companies and financing agreements, further reinforcing synergy in the mining sector. In short, iron ore reflects a mature trade relationship: despite price volatility, export volumes remain high, and Brazil continues to be a central part of China’s iron ore import matrix—benefiting from the country’s ongoing urbanization and industrialization.
V. The Brazilian Stock Market
In 2025, Latin American stocks shined on Wall Street, fueled by a new commodity boom and the global capital shift triggered by the intensifying trade war between the United States and China. As nvestors sought alternatives to assets directly exposed to geopolitical risk—while still aiming for markets with strong fundamentals and commodity-exporting strength—Latin American companies, particularly from Brazil, stood out for their profitability and resilience. Foreign capital flows began to refocus on the region as a lever for growth, especially in sectors like mining, energy, agribusiness, and food production. As a result of this trend, six of the ten best-performing Latin American ADRs listed on U.S. exchanges in 2025 were Brazilian. Among them were major names such as Banco do Brasil, Petrobras, JBS, and Ambev—cementing Brazil’s status as a leading emerging market and a top investment destination in times of global uncertainty.
VI. Fears and Uncertainties
Despite the strong performance of Brazilian stocks in 2025 and the country’s strategic position in global commodity trade, significant uncertainties remain regarding Brazil’s macroeconomic sustainability. The combination of high inflation and persistently elevated real interest rates continues to weigh on domestic consumption and productive investment. Meanwhile, the Lula administration struggles to meet fiscal targets without compromising social programs and political transfers.
The federal budget remains under strain, with rigid expenditures and limited room for maneuvering within a fiscal framework that aims to balance responsibility with economic expansion. Investors recognize Brazil’s potential but are also cautious, aware of the need for structural reforms and improvements in fiscal governance.
There is growing anticipation that the next administration, beginning in 2026, will be able to unlock Brazil’s long-standing macroeconomic bottlenecks—reducing the cost of capital, improving the regulatory environment, and strengthening institutional credibility. These are essential conditions for converting the current export boom into a lasting and sustainable growth cycle.
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