Trump, citing U.S. farmers, whacks metal tariffs on Brazil, Argentina
WASHINGTON/RIO DE JANEIRO (Reuters) - The U.S. President on Monday sent shock waves through Brazil and Argentina, announcing he would restore tariffs on U.S. steel and aluminum imports from the two countries in apparent retaliation for currency weakness he said was hurting U.S. farmers.
In an early morning tweet that sent officials from both countries scrambling for explanations from Washington, Donald Trump said Brazil and Argentina were “presiding over a massive devaluation of their currencies.”
Both countries have actively been trying to strengthen the real and the peso against the dollar. Their currencies have been buffeted by weakness that analysts partially attribute to Trump’s larger trade battle with China.
Trump, who gave no details about his new plan, said the currency weakness was hurting U.S. farmers, a key demographic for him ahead of the November 2020 election. The United States’ trade war with China has made U.S. agricultural products less competitive compared with those from Brazil and Argentina.
“Effective immediately, I will restore the Tariffs on all Steel & Aluminum that is shipped into the U.S. from those countries,” Trump wrote.
Representatives for the U.S. State Department and the Office of the U.S. Trade Representative did not immediately respond to a request for comment.
Brazil’s president, Jair Bolsonaro, an avowed Trump fan who has sought closer U.S. ties, said in a local radio interview that he would call his U.S. counterpart, who he was confident would listen to Brazil’s concerns.
“I don’t see this as retaliation,” Bolsonaro told Radio Itatiaia. “I’m going to call him so that he doesn’t penalize us ... Our economy basically comes from commodities, it’s what we’ve got. I hope that he understands ... and I’m almost certain he’ll listen to us.”
In a statement, Brazil’s government said it was already in discussions with Washington. A source familiar with Brasilia’s reaction rejected the U.S. claim of currency manipulation, noting the central bank was working to lift the real.
Argentine Production Minister Dante Sica said Trump’s announcement was “unexpected” and he was seeking talks with U.S. officials. Additionally, Argentina’s Foreign Ministry said it will begin negotiations with the U.S. State Department.
Sica said Argentine government officials had discussed how to deal with the measures on Monday morning and that he was seeking talks with U.S. Commerce Secretary Wilbur Ross to obtain more detail.
“We are trying to get more precision (about the announcement) and what impact it could have” both commercially and administratively, Sica said. “We do not yet know the magnitude (of the measure).”
He said Argentina has exported around $700 million in steel and aluminum to the United States so far this year.
Trump’s accusation that the Brazilian and Argentine currencies were being artificially devalued was met with widespread skepticism.
In Brazil, the recent slide in the real has caused a public outcry and led the central bank to intervene, while Argentina put in place currency controls to steady its beleaguered peso.
Trump also urged the Federal Reserve to lower interest rates so countries “no longer take advantage of our strong dollar. Lower Rates & Loosen - Fed!”
Trump has repeatedly urged the U.S. central bank to lower rates to below zero, but Fed policymakers have been reluctant. Fed policy makers hold their next meeting on Dec. 10-11.
The Instituto Aco Brasil, the country’s main steel lobby, said it was “perplexed” by Trump’s decision. It said in a statement that Brazil’s government could not be meddling with the real as the currency is free-floating.
“The decision to tax Brazilian steel as a way of ‘compensating’ the American farmer is a retaliation against Brazil,” it said. “Such a decision ends up hurting the American steelmaking industry itself, which needs semi-finished products exported by Brazil in order to operate its mills.”
Brazilian steelmakers’ shares fell initially but then rebounded. Analysts from JP Morgan suggested buying the sector on any weakness, saying any tariff hike “should not be material” given their relatively small U.S. export volumes.
Shares of Ternium Argentina (TXAR.BA) slumped 5.5% after Trump’s tweet, with JP Morgan noting it is the most exposed steelmaker in Latin America to the tariff move. The shares pared some losses to trade down 2.9% in afternoon.
Reporting by Gabriel Stargardter in Rio de Janeiro and Andrea Shalal and Susan Heavey in Washington; Additional reporting by Cassandra Garrison and Maximilian Heath in Buenos Aires, Lisandra Paraguassu in Brasilia and Pedro Fonseca in Rio de Janeiro; Editing by David Gregorio and Matthew Lewis