Lula risks a US-Brazil trade war with anti-dollar rhetoric before a potential Trump summit. We analyze the calculated move: is it sovereignty or diplomatic escalation?
Lula's Dollar Challenge: The Calculated Risk Before a Possible Trump Summit
By: Carlos Santos
The Geopolitical Stakes of Brazil's Anti-Hegemony Rhetoric
The global stage is set for a high-stakes diplomatic confrontation, an economic chess match where currency and sovereignty are the pawns. The recent, sharp rhetoric from Brazilian President Luiz Inácio Lula da Silva, criticizing the dominance of the US dollar and advocating for trade in national currencies, is a calculated move that places him directly in the crosshairs of a potential future US administration led by Donald Trump. The threat of a massive US tariff hike—the so-called "Tarifazo"—looms large over Brazilian exports, signaling an aggressive, punitive stance from the former (and possibly future) US leader. This isn't just about trade; it’s a test of Brazil’s resolve as a leading voice of the Global South. I, Carlos Santos, view this situation not merely as a dispute but as a foundational challenge to the established financial order, forcing Brazil to choose between diplomatic prudence and asserting economic autonomy.
The BRICS Frontline: Decoupling from Dollar Dependency
The foundation of the current crisis lies in two intertwined political and economic maneuvers: Trump's use of trade tariffs as a tool for political interference, and Lula’s push for de-dollarization, particularly through the expanded BRICS bloc (Brazil, Russia, India, China, South Africa, plus new members). Lula's defense of multilateralism and his criticism of US protectionism—often without directly naming the former president—highlight a fundamental disagreement over global governance. The Brazilian leader sees the reliance on the dollar as a source of national vulnerability and cost, pushing for alternative payment methods and a shared trade currency within BRICS to reduce this dependency. The Times Brasil column by Eduardo Gayer succinctly captures this tension, arguing that Lula is assuming a significant risk by amplifying anti-dollar rhetoric just as the threat of punitive US tariffs becomes a reality. This risk is primarily calculated on the belief that Brazil’s diversified trade, bolstered by the BRICS alliance, can withstand the economic pressure from Washington.
🔍 Zoom In on the Reality
The reality on the ground is that the US tariffs, sometimes reaching 50%, are not based on conventional economic rationale but are explicitly political, tied to Trump's displeasure over the prosecution of former Brazilian President Jair Bolsonaro and his allies for alleged attempted coups. This unprecedented move by a major trade partner to interfere in the domestic judicial affairs of a sovereign nation, especially one with a 201-year diplomatic history with the US, turns a trade spat into a question of national dignity. Brazil's pushback undermines Trump's trade rhetoric because, despite Trump’s stated concern about "unsustainable Trade Deficits," the US has run a trade surplus with Brazil for 16 consecutive years, totaling $7.4 billion in goods in 2024, or $28.6 billion including services.
Lula's response has been one of controlled defiance, vowing to use Brazil's Economic Reciprocity Law to implement retaliatory tariffs if Trump follows through on his threat. He has publicly stated that “respect is good” and that if the US charges 50% tariffs, Brazil will reciprocate. This strong stance is not solely for domestic consumption; it is a clear signal to the international community, particularly the Global South, that Brazil refuses to be treated as a "banana republic". The calculated risk is that by standing firm against US aggression, Lula will rally internal and external support, turning an economic threat into a political opportunity to strengthen his mandate and his international alliances, potentially accelerating the Global South's search for alternatives to the US-dominated system. The challenge for Brazil is to negotiate without capitulating, ensuring the diplomatic channel remains open even while seeking recourse through the World Trade Organization (WTO).
Presidente Luiz Inácio Lula da Silva - Tom Molina/FotoArena/Estadão Conteúdo📊 Panorama in Numbers
The economic impact of the potential Tarifazo on Brazil is measured not only by the direct cost but by the political signal it sends. According to Oxford Economics, even a permanent 40-percentage point tariff hike on US imports from Brazil would have limited impacts to the Brazilian economy. This resilience is due to Brazil's relatively closed and highly diversified economy; only about 10% of total Brazilian exports—representing a mere 2% of the national GDP—go to the US. This means Brazil is not economically dependent enough to be “bullied into abandoning democracy”.
However, the raw numbers reveal where the pain points are. The US tariffs target a broad range of products, with exemptions for large sectors like civil aircraft parts, aluminum, wood pulp, and fertilizers. Crucially, the US has imposed a 50% tariff on numerous Brazilian products, which is the highest rate of the 'Tarifazo' anywhere in the world. The American Chamber of Commerce for Brazil estimated that the product categories currently exempted from the tariffs sum up to US$ 18 billion in exports in the previous year, or 43% of total exports to the North Americans. The risk, therefore, lies not in a collapse of the Brazilian economy, but in the escalation of tensions that could flare further, hitting previously exempted sectors and creating crippling unpredictability for Brazilian exporters. The numbers show that Brazil's economic diversification provides a shield, but the diplomatic uncertainty generated by the tariff threat represents the true variable cost.
💬 O Que Dizem Por Aí (What They Say Out There)
The global consensus, particularly among analysts and diplomatic observers, suggests that Trump’s trade offensive is fundamentally a political, rather than economic, strategy that could ultimately backfire. “Trump is attacking Brazil to weaken BRICS” is a common narrative, suggesting the US is using Brazil to send a warning to other assertive middle powers in the bloc. Chatham House argues that this strategy risks undermining the US global standing and could, paradoxically, strengthen Brazil’s alliances with China, Europe, and the Global South, thereby accelerating the very multipolar world order the US seeks to prevent.
Inside Brazil, the political reaction is mixed but largely in support of the President’s strong stance. A Quaest poll indicated that 55% of Brazilians believe Lula provoked Trump by criticizing him at the BRICS Summit. However, the same political dynamics suggest that Trump’s move was a "shot in the foot" for the far-right and a “gift, from a political point of view,” to the Lula government, providing him with a strong anti-imperialist narrative. Analysts like Thomas Traumann called Trump's initial letter and threat "a game changer" for the next election, noting it gave Lula a strong narrative and positioned the former Brazilian president, Bolsonaro, as the "guilty party for any economic problems". The general sentiment is that Lula is seizing the moment to advance an anti-imperialist agenda and commit more firmly to the Global South, using the US threat as leverage to unite national business interests under the banner of sovereignty.
🧭 Caminhos Possíveis (Possible Paths)
Given the volatility of the situation, the path forward for Brazil presents a diplomatic fork in the road, with two main possible trajectories:
The Multilateral/De-dollarization Path: This is the current direction championed by Lula. Brazil would continue to strengthen its position within BRICS, pushing hard for a common trade currency or the use of national currencies in bilateral trade with major partners like China and Indonesia. On the trade front, Brazil would take the case to the World Trade Organization (WTO) and prioritize opening new markets to diversify trade further, reducing the US share of exports below the current 10%. This path involves a calculated acceptance of short-term trade friction with the US, betting on long-term economic independence and the rising power of the Global South. It is a long game designed to minimize vulnerability and costs associated with the dollar's dominance.
The Direct Negotiation/De-escalation Path: This path would involve more patient, direct, and lower-profile negotiations with the US, possibly through diplomatic channels or with the help of business groups like the US and Brazilian Chambers of Trade, which have called for the suspension of the tariffs. While Lula has ruled out direct talks with Trump for now, this could change if a meeting is formalized. The goal would be to negotiate a partial or full lifting of the tariffs in exchange for concessions on non-political issues, such as investment facilitation or specific regulatory reforms. The risk here is that it could be perceived domestically and internationally as "capitulation," undermining Lula's political leverage and his leadership within BRICS. The most likely immediate course is a hybrid approach: assertive rhetoric combined with quiet diplomatic efforts to postpone or soften the tariffs.
🧠 Para Pensar… (Food for Thought)
The confrontation between Lula's anti-dollar rhetoric and Trump's protectionist tariffs raises profound questions about the nature of sovereignty in the 21st century. When a global power uses economic tools—tariffs and sanctions—to interfere in the judicial process of a sovereign, democratic nation (the Bolsonaro trials), it establishes a dangerous precedent. This moves the debate far beyond mere trade imbalance and into the realm of neocolonial offensive. Is it acceptable for the US to weaponize its economic supremacy (the dollar's hegemony) to achieve political ends in other countries?
Lula's push for de-dollarization, while rooted in Brazil's national interest to reduce dependency, is an inherently anti-hegemonic act that challenges the foundation of the post-WWII economic order. The fact that the US trade surplus with Brazil is substantial (over $28 billion, including services), yet Trump's stated reason for the tariffs is a vague "trade deficit," further suggests that the action is purely punitive and political. The question for the reader, and for the world, is: Does the pursuit of a multipolar world—where countries like Brazil can trade freely in their own currencies—justify the calculated risk of an immediate trade war with the world’s largest economy? The answer determines the speed and direction of global economic realignment.
📚 Ponto de Partida (Starting Point)
To truly understand the gravity of Lula’s calculated risk, one must begin with the core of Brazil's diplomatic position: the unwavering defense of its sovereignty and its commitment to multilateralism, even when facing the world's most "bellicose country". Lula's stance is articulated not as a challenge to the US as an economic partner, but as a demand for respect and recognition of Brazil’s strategic interests. This is not a sudden pivot but an acceleration of the strategy to diversify commerce away from a single dominant market, a project long pursued by Brazilian diplomacy.
The starting point for this analysis is the recognition that Brazil is no longer as dependent on the US as it once was, having built broad commercial ties throughout the world, particularly with China. This new reality gives Lula the diplomatic composure to speak firmly about human dignity and national character in the face of the US threat. The 50% tariff on Brazilian goods serves as the catalyst, forcing Brazil to immediately test the strength of its alliances (especially BRICS) and its economic diversification. The initial reaction, seeking recourse through the WTO and prioritizing outreach through BRICS, demonstrates a commitment to formal, multilateral processes over direct, anxiety-driven talks with Trump. The decision not to engage directly with Trump, at least initially, highlights that for Lula, the principles of sovereignty outweigh the immediate economic necessity of de-escalation.
📦 Box Informativo 📚 Did You Know?
Did you know that the trade conflict between Brazil and the US under the Trump administration is not entirely new, but the scale and political nature of the recent threats are unprecedented? Trump's previous threat was a blanket 100% tariff on BRICS members should they pursue an alternative to the US dollar. This older threat came just as Brazil was preparing to assume the rotating presidency of the enlarged BRICS bloc in 2025, immediately placing the currency issue at the center of Brazil's diplomatic agenda.
The current 50% tariff is unique because it officially links a trade measure to a specific judicial case in a foreign country—the trials related to former President Bolsonaro. This highly unusual diplomatic move bypasses conventional US legal justifications for tariffs (like Section 201 for market disruption or Section 301 for unfair practices). The legal flimsiness of the tariffs is why the Brazilian government is confident in its appeals to the WTO. Furthermore, the economic reality is that the US's trade threat against Brazil is being analyzed globally as part of a broader strategy to weaken and contain the growing influence of the BRICS nations, which Lula is actively trying to consolidate and empower. The diplomatic strategy for Brazil is to leverage this external political pressure to strengthen its internal and external alignment with the Global South.
🗺️ Daqui Pra Onde? (Where From Here?)
The long-term trajectory for Brazil hinges on its success in two critical, interconnected areas: solidifying its de-dollarization agenda and maintaining internal political unity against foreign interference.
From here, the focus shifts to the BRICS framework, where Lula seeks to convert rhetorical support into concrete action, such as piloting trade settlements in national currencies with major partners like China, Russia, and the new members. This process is slow but is the only sustainable way to permanently reduce Brazil's economic vulnerability to US political and trade volatility. The President has stated clearly that the goal is multilateralism, not unilateralism in commerce.
Domestically, the crisis serves as a valuable opportunity for Lula to rally the national business community. Brazilian entrepreneurs, who may not traditionally be nationalist or developmentalist, run to defend their interests when they are financially threatened by foreign tariffs. The government's challenge is to seize this loophole, putting the defense of national sovereignty and economic independence at the forefront, effectively neutralizing the opposition's ability to use the tariffs against the government. The political and economic risks are immense, but the opportunity to reshape Brazil's global standing—as a leader unafraid to confront the dominant power—is a powerful incentive for Lula's calculated gamble to pay off. The world watches to see if Brazil will be a "game changer" or merely a casualty in the next global trade skirmish.
🌐 Tá na Rede, Tá Online (On the Net, Online)
The debate is not just taking place in diplomatic cables and presidential palaces; it's vibrant across social media and digital news platforms, often characterized by the sharp, immediate reactions of key figures. The column that inspired this piece and the related news coverage quickly went viral, prompting immediate reactions from political observers and the public. "The people post, we think. On the net, online!"
When Trump initially announced the 50% tariff, he used a public letter on his social media platform, bypassing conventional diplomatic channels, which instantly turned the tariff threat into a digital spectacle. Lula’s response has been equally digital, using televised interviews and public speeches to directly address the American leader’s actions, calling them “very wrong and irresponsible”. This digital confrontation has led to a surge in political commentary. Analysts and influencers are debating whether the tariff threat is a genuine economic policy or merely “Trump’s MAGA foreign policy” interfering in a sovereign nation’s judicial process. The online discussion is crucial for measuring public sentiment and pressuring both the US and Brazilian governments, highlighting the geopolitical drama as it unfolds in real-time.
🔗 Âncora do Conhecimento (Knowledge Anchor)
To truly grasp the strategic depth of Brazil's push for economic autonomy amidst these global trade and currency conflicts, it is vital to understand how nations globally are reassessing their financial security and tax policy to remain competitive. For a deep-dive on how major economies are using fiscal and investment incentives to protect and grow their capital in this multipolar environment, including schemes that offer huge tax advantages, I invite you to click here This related analysis provides necessary context for understanding the financial levers being pulled by sovereign states in response to geopolitical instability.
Reflexão Final (Final Reflection)
Lula's decision to criticize the dollar and elevate the BRICS agenda, knowing the looming threat of the "Tarifazo" from Trump, is a calculated risk built on a conviction: that the world has fundamentally changed. Brazil, as a leading economy in the Global South, can no longer afford to be passively subservient to the dictates of a single hegemonic power. The tariff threat is a punitive measure dressed as trade policy, designed to compel political behavior. By standing firm and championing multilateral trade in national currencies, Lula is attempting to turn Trump’s neo-colonial offensive into a catalyst for greater economic independence. The final measure of this risk will not be the immediate economic cost, but whether Brazil successfully uses this moment to accelerate the creation of a truly multipolar and more equitable global financial system.
Recursos e Fontes em Destaque (Featured Resources and Sources)
Times Brasil: Coluna de Eduardo Gayer (Tema central da análise)
Agência Brasil (English): Lula not to challenge US, but says Brazil is no “banana republic”
Oxford Economics: Brazil Lula and Trump engage in a trade arm wrestle
PBS NewsHour: Brazil vows retaliatory tariffs if Trump follows through on 50% tariff threat
Blavatnik School of Government (Oxford): Brazil's pushback undermines Trump's trade rhetoric
⚖️ Disclaimer Editorial
This article reflects a critical and opinionated analysis produced for the Diário do Carlos Santos, based on public information, reports, and data from sources considered reliable. It does not represent official communication or institutional positioning of any other companies or entities that may be mentioned herein.
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