Brazil hikes steel tariffs to curb Chinese imports

The Brazilian government will impose an extra tariff in an attempt to reduce steel imports, mainly from China, in response to pressure from local producers.

The government will impose a tax of up to 25% on 11 steel products to be charged on volumes that exceed the level of imports seen in recent years. Imports below that level will continue being charged 10.8%.

“It was a measure to protect employment, to encourage new investments and modernization, but an extremely cautious one,” Geraldo Alckmin, Brazil’s vice president and trade and industries minister, said in a statement. The measure will be in force for 12 months.

Domestic steel companies have complained about the large volumes of Chinese steel being sold at lower prices than that produced in Brazil, an issue that has impacted the industry elsewhere in the world.

"2024 started as challenging, with high levels of imports and unfair competition," Marcelo Chara, CEO of local steelmaker Usiminas, said in a conference call with analysts to discuss the company's Q1 results.

"It’s important that Brazil implement measures to promote fair competition in steel. The world is putting import taxes and mechanisms in place to avoid a flood of absolutely unfair trade, and I'm confident that Brazil can move in the right direction," he said.

However, sectors that use steel, such as manufacturing, machinery and equipment, civil construction and automobiles, have criticized the hike in import tariffs.

The issue is a sensitive one for the government since Brazil wants to avoid any type of conflict with China, the country's largest trade partner.

However, the surcharge is likely to have a limited impact. 

"The extra tax imposed by the Brazilian government follows a similar strategy that is being adopted by the US and also throughout the European Union. However, the volume of excess steel produced in China is very high and so there's room for China to further reduce the price of steel, which limits the impact of this extra tariff imposed by several countries," José Augusto de Castro, president of Brazilian exporters’ association AEB, told BNamericas. 

Nevertheless, applying more import tariffs on Chinese steel poses risks for the Brazilian government, according to Castro.

"China is the largest importer of various Brazilian commodities, such as soybeans and iron ore. If Brazil decides to impose even higher import tariffs, affecting Chinese steel too much, retaliation by the Chinese government is possible, affecting various sectors in Brazil," he added.