Brazil Seeks Diversification Amid US Tariff Hikes with EFTA Deal

Strategic Insights -

Brazil has been intensifying trade negotiations with various nations, especially in the wake of increasing tariffs imposed by the United States. As it prepares to sign a trade agreement with the European Free Trade Association (EFTA), the country is betting on new markets to offset the effects of US-imposed tariffs. The deal with EFTA, set to be signed on Tuesday, will create a market of over 300 million people with a combined GDP of $4.3 trillion.

Key Takeaways:

  • The Brazilian government aims to expand the country's network of international agreements through the EFTA deal, which will enable domestic industries to increase exports and encourage companies to become more efficient and competitive.
  • The treaty with EFTA will eliminate import tariffs for some sectors, such as industrial and fisheries, and establish quotas for others, easing exports compared to current levels.
  • The agreement covers trade in goods and services, intellectual property, competition, and sanitary and phytosanitary measures, and Brazil sees opportunities to increase shipments of beef, corn, soybean meal, cane molasses, honey, roasted coffee, ethanol, and fruit.
  • Trade between Brazil and EFTA totaled $7.14 billion in 2017, with highlights including gold exports to Switzerland ($948 million) and alumina exports to Norway and Iceland ($853 million and $321 million, respectively).
  • The deal comes as Brazil feels the initial effects of a 50% US tariff on its exports, with sales to the US falling 18.5% compared to the same period a year earlier.
  • The Brazilian government has also launched a broader push to expand Brazil's export markets, pursuing negotiations with countries including China, India, Canada, Mexico, and the United Arab Emirates.

Statistics:

  • Brazil will sign a trade treaty with EFTA, a group of Switzerland, Norway, Iceland, and Liechtenstein, on Tuesday, creating a market of over 300 million people with a combined GDP of $4.3 trillion.
  • Trade between Brazil and EFTA totaled $7.14 billion in 2017, with highlights including gold exports to Switzerland ($948 million) and alumina exports to Norway and Iceland ($853 million and $321 million, respectively).
  • Sales to the US fell 18.5% compared to the same period a year earlier, while overall goods exports rose 3.9% in the same period.
  • EFTA's GDP is $4.3 trillion, representing about one-fifth of the $22 trillion market that the Mercosur-European Union deal would generate.
  • Brazilian exporters can see opportunities to increase shipments of beef, corn, soybean meal, cane molasses, honey, roasted coffee, ethanol, and fruit.

Sources:

  • "Brazil, EFTA to sign trade deal in Rio on Tuesday." Valor.
  • "Brazil to sign trade deal with EFTA amid US tariff hikes." Valor.
  • "Brazil seeks to expand export markets, says minister." Valor.