Trump Threatens Tariffs on Brazilian Oil Amid Political Tensions

U.S. President Donald Trump has escalated tensions with Brazil by threatening to impose 50% tariffs on the country’s oil exports. This move is part of Trump’s response to what he perceives as the Brazilian government’s persecution of Jair Bolsonaro, the former president who is currently on trial for allegedly attempting to overturn the results of the 2022 election. In a post on Truth Social, Trump urged Brazilian President Luiz Inácio Lula da Silva to end what he termed a “Witch Hunt that should end IMMEDIATELY!”

As the situation develops, Lula has indicated that Brazil would retaliate if Trump moves forward with the tariffs. He told local outlet Record, “If he charges us 50%, we’ll charge him 50%.” The stakes are high, as crude oil is Brazil’s top export to the United States, with a value of approximately $5.83 billion in 2024. So far, crude oil exports have been exempt from the 10% baseline tariffs Trump proposed on most foreign imports earlier this year.

In the previous year, Brazil exported an average of 1.78 million barrels per day (bpd) of crude oil globally, with about 243,000 bpd going to the U.S., according to data from ANP and the EIA. Analysts from BTG Pactual suggest that any disruption from the tariffs would likely be temporary. They noted in a recent client note, “These tariffs may generate short-term noise in trade flows and impact margins on spot contracts, but do not represent a structural risk.”

Despite the potential for short-lived effects, concerns remain. The Brazilian Petroleum Institute (IBP) has expressed worry over Trump’s threats, urging the Lula administration to seek a diplomatic resolution. Petrobras, Brazil’s state-controlled oil company, is already facing challenges from lower oil prices and rising production costs. In May, CEO Magda Chambriard stated that the company would revise its five-year strategic plan to focus on cost reduction while maintaining investment levels for the current year.

“When the price goes up, we feel more comfortable throwing ideas around. When the price goes down, it is time to tighten our belts,” Chambriard commented, referencing current Brent prices around $65 per barrel. This change in strategy marks a shift from Petrobras’ earlier approach under Lula’s administration, which had aimed to increase domestic spending to create jobs and stimulate economic growth.

Initially, Petrobras unveiled a $102 billion capital expenditure plan for 2024–2028, which was later increased to $111 billion for 2025–2029. Recently, the company has begun evaluating the sale of its onshore fields in the Bahia state, known as the Polo Bahia Terra cluster, due to high production costs and underwhelming yields. This asset, once considered underperforming, has lost competitiveness compared to Petrobras’ more lucrative pre-salt offshore reserves, which now account for over 70% of Brazil’s oil output.

Chambriard noted, “When oil is at $100 a barrel, it makes more sense than at $65 a barrel,” adding that the decision on whether to keep, outsource, or sell the Bahia Terra asset has not yet been made.

The potential implementation of steep tariffs could further skew the trade balance between Brazil and the U.S. In 2024, Brazil recorded a $6.8 billion trade deficit with the U.S., making it one of the few nations that imports more from the U.S. than it exports. Major U.S. exports to Brazil include fuels, aircraft, machinery, and electronics.

As these developments unfold, the impact on Brazil’s economy and its oil sector remains to be seen, with both nations navigating a complex landscape of trade and political relations.