Brazil-US trade row: Lula unveils $5.5 billion relief plan for exporters hit by tariffs; Washington responds with fresh sanctions

File photo: US secretary of state Marco Rubio (left) and Brazilian President Luiz Inácio Lula da Silva (Picture credit: AP)

Brazil has launched a sweeping support package to cushion domestic businesses from the impact of a steep new US tariff, only to face fresh sanctions from Washington hours later.As per news agency AP, Brazilian President Luiz Inácio Lula da Silva on Wednesday announced the “Sovereign Brazil” plan, a year-long programme worth 30 billion reais ($5.5 billion) aimed at helping exporters hit by the 50% import duty imposed by US President Donald Trump on a range of Brazilian goods. Lula called the package “a first step” to protect local producers and said it would be presented to Congress for approval.The measures include delaying certain tax payments, granting 5 billion reais ($930 million) in tax credits to small and medium-sized companies through 2026, offering insurance for cancelled overseas orders, and encouraging government agencies to buy products now blocked from entering the US. The plan also extends by one year tax benefits for companies that import materials to make goods for export, a scheme known as “drawback”.“We cannot be scared, nervous and anxious when there is a crisis. A crisis is for us to create new things,” Lula said. He dismissed the US rationale for the tariffs, adding: “The reasons given to impose sanctions against Brazil do not exist.”Despite pressure from some quarters, Lula said he would not, “for now”, retaliate with higher tariffs on American imports. The president also underlined that he has never spoken to Trump and claimed the US leader was unwilling to negotiate.The tariff move is widely seen as linked to Trump’s public defence of his ally, former Brazilian president Jair Bolsonaro, who is under house arrest. Trump has echoed Bolsonaro’s supporters by alleging that the prosecution against the former leader is politically motivated. Lula, however, stressed that Brazil’s judiciary is independent and the executive has no influence over Supreme Court decisions.In an apparent reference to the storming of the US Capitol in 2021, Lula remarked: “If what happened at the Capitol had happened in Brazil, he (Trump) would be on trial here too.” Bolsonaro’s case is expected to move towards sentencing between September and October.The announcement of Brazil’s plan coincided with a separate escalation from Washington. US secretary of state Marco Rubio declared visa restrictions under the Magnitsky Act against at least two Brazilian officials, Mozart Sales and Alberto Kleiman, accusing them of involvement in Cuba’s controversial overseas medical worker scheme. Rubio described Brazil’s “More Doctors” programme, which employs thousands of Cuban medics, as “an unconscionable diplomatic scam of foreign ‘medical missions’.”Brazil’s health minister Alexandre Padilha, who launched the programme in 2013 during his first term in the role, hit back: “This programme saves lives and it is approved by those who matter most: the Brazilian people. We will not bow to those who are against vaccines, against research, against science.” According to the Brazilian government, nearly 25,000 medical professionals are currently part of the scheme, though it did not say how many are Cuban nationals.Reactions to the US move were sharply divided. Eduardo Bolsonaro, a lawmaker and son of the former president, praised Washington’s stance, calling it “a clear message” that those supporting “autocratic regimes” would eventually be held to account. By contrast, finance minister Fernando Haddad argued the sanctions were politically charged, saying Brazil was being “sanctioned for being more democratic than its aggressor.”“This one comes from the outside, but unfortunately it has the support of radicalised sections of Brazil’s society,” Haddad said, while business leader Ricardo Alban described the tariff fallout plan as “palliative, but necessary” to shield the country’s industries.