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Brazil feels pain of US steel tariffs
[BRASÍLIA] Brazilian iron and steel shares took a hit Friday, as markets weighed a potential trade war in response to Washington's decision to impose hefty tariffs on foreign steel and aluminum.
Brazil is the second biggest steel exporter to the United States after Canada - and the government is deeply worried about US President Donald Trump's imposition of 25 per cent tariffs on steel and 10 per cent on aluminum.
Foreign minister Aloysio Nunes and foreign trade minister Marcos Jorge shot back with a statement Thursday warning that Brazil "will resort to all necessary steps... to protect its rights and interests."
Mr Nunes said Brazil was "greatly concerned" by the measure which would "bring severe damage to Brazilian exports and have a negative impact on the flow of bilateral trade."
On the Sao Paulo stock exchange Friday, Vale was down 1.33 per cent in late-morning trading, Gerdau was down 1.72 per cent and Usiminas 1.8 per cent. Shares had already taken hefty hits the previous day after Mr Trump's announcement.
US Nafta partners Canada and Mexico are being exempted from Mr Trump's tariffs, but Brazil will be left wide open to the measures. Brazilian steel accounts for nearly 14 per cent of US steel imports by volume, the US commerce department says.
The US market accounted for 32.9 per cent of all Brazil's steel exports last year, the Brazilian government says.
Brazil's National Confederation of Industry (CNI) has gone further, blasting Washington's "unjust, illegal" move which it says will cost Brazil some US$3 billion a year in lost steel exports and US$144 million in aluminum trade losses.
Diego Bonomo from the CNI says the United States will get blowback because Brazil is the main importer of US carbon steel. Also, 80 per cent of Brazilian steel exports to the United States are semi-finished products used by US industry, then sold on.
Mr Trump's tariffs, due to take effect in 15 days, "will have two negative effects: first on exports of Brazilian steel to the North American market and secondly on US exports to Brazil," Mr Bonomo said.
The fact that Brazil's exporter rivals Canada and Mexico will not be under the same tariffs will further hurt Brazilian competitiveness, said Jose Augusto Coelho Fernandes, policy director at the CNI.
"Brazilian industry regards this measure of President Trump with great worry. Firstly, since he excluded the Nafta countries from the initial impact, it leaves Brazil as the most-affected country," he said.
"If Brazil doesn't manage to get an exemption it will certainly file a formal complaint at the WTO along with the European Union and China," Risk Brief consultancy said in a note to clients.