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Updated April 3, 2020
U.S.-Brazil Trade Relations
Overview
2016 (3.6%) as it struggled with its worst recession in
The United States and Brazil have enjoyed a strong
recorded history. Although the economy began to recover in
economic relationship for many years. In 2019, Brazil
2017, GDP growth remains slow (about one percent in
ranked second among the United States’ Latin American
2017, 2018, and 2019). Brazil’s unemployment rate has
trading partners in goods and nineteenth among all U.S.
remained above 10% for about four years. The International
trading partners. The United States has maintained trade
Monetary Fund had projected 2.2% growth in GDP for
surpluses with Brazil in goods since 2008 and in services
2020, but many analysts now forecast an economic
since at least 1992. Brazilian President Jair Bolsonaro, who
contraction due to the impact of the COVID-19 pandemic.
entered into office in January 2019, is expected to continue
to pursue free-market reforms during his four-year term,
Brazil’s economy has been hampered by a number of
which ends in December 2022, and stronger U.S. trade ties.
external factors. Chief among these was the 2011 drop in
commodity prices. Waning global demand for products like
Brazil’s past economic strategy favored protectionist trade
minerals, crude oil, and agricultural goods were particularly
policies, but after many years of minimal growth, Brazil
damaging, as these products make up significant portions of
began to adopt a more liberal stance. In March 2020,
exports. Other factors include the depreciation of the
President Donald Trump and President Bolsonaro
national currency, a decline in consumption, the spike in
announced that the two countries intended to deepen
global oil supply driven by countries such as the United
discussions later this year on the bilateral trade relationship,
States and Canada, corruption, and tax and other policies.
which could potentially move toward free trade agreement
(FTA) negotiations. Since taking office, President
From 1989 to 1995, Brazil’s average applied tariffs fell
Bolsonaro has taken steps to cooperate with the United
notably from 329% to 11%, and average applied tariffs on
States on issues of mutual interest, including trade. Brazil’s
manufactured products fell from 18% in 1998 to 9% in
long-term trade strategy, however, is bound by its status as
2006. Nevertheless, Brazil’s tariffs generally remain higher
a party to the Mercado Común del Sur or Southern
than those of the United States. According to the World
Common Market (Mercosur), a common market trade
Trade Organization (WTO), Brazil’s trade-weighted tariff
arrangement that also includes Argentina, Paraguay and
rate is 10.0%, while that of the United States is 2.3% (see
Uruguay. If Brazil were to pursue an FTA with the United
Table 1).
States, it would have to decide whether to pursue it as a
joint enterprise alongside Mercosur, or to pursue a bilateral
Table 1. U.S. and Brazil Average Tariffs, 2018
agreement, which would require changing Mercosur’s rules.
Trade
The United States and Brazil have moved to bolster trade
Country
Simple
Simple MFN
Weighted*
ties in certain areas since March 2019. The two countries
Applied
Bound*
*
agreed to take steps toward lowering trade barriers for
United States
3.4
3.4
2.3
certain agricultural products, including wheat, pork, and
beef. They also announced several other agreements,
Brazil
13.4
31.4
10.0
including a technology safeguards agreement that will
Source: World Trade Organization (WTO).
allow U.S. space launches in Brazil, while ensuring proper
Notes: *Most-favored nation (MFN) basis. **2017 data.
handling of sensitive U.S. technology consistent with U.S.

laws. The United States also endorsed Brazil’s accession to
Since 1991, Brazil, along with Argentina, Uruguay, and
the Organisation for Economic Co-operation and
Paraguay, has been part of Mercosur, a partial customs
Development (OECD). Some experts contend that the
union. Mercosur has a high common external tariff and
United States and Brazil have numerous reasons to build
various nontariff barriers. Recently, Brazil and its Mercosur
upon the progress made in the economic relationship over
partners have expressed interest in rethinking the trade
the years. As Latin America faces increasing uncertainty
arrangement. In 2019, Mercosur and the European Union
amid global power shifts and external shocks, some
concluded FTA negotiations, which would eliminate tariffs
observers contend that there are strategic and economic
in several key sectors, including autos, machinery products,
reasons to strengthen trade ties, although there may be
and dairy and other agricultural products. The agreement,
opposition from certain labor or industry groups.
which has yet to be signed, would open Brazil’s market to
Brazil’s Economy
EU products and could affect U.S. exports to Brazil.
Brazil is the world’s fifth-largest country and ninth-largest
Brazil has duty-free benefits under the U.S. Generalized
economy, with a gross domestic product (GDP) of $1.9
System of Preferences (GSP) program, which provides
trillion and a GDP per capita of $8,797 (estimated for
nonreciprocal, duty-free tariff treatment to certain U.S.
2019). The country’s economy shrank in 2015 (3.8%) and
imports from designated developing countries. Brazil was
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U.S.-Brazil Trade Relations
the fourth-largest beneficiary of the program in 2019, with
The accumulated stock of U.S. foreign direct investment
duty-free imports to the United States valued at $2.3 billion,
(FDI) in Brazil was $70.9 billion in 2018, a $2.6 billion
or 7.4% of all U.S. merchandise imports from Brazil.
(3.8%) increase from 2017, but lower than the peak reached
Congress most recently reauthorized the program until
in 2012 of $76.8 billion. Most U.S. FDI in Brazil (32.3%) is
December 31, 2020, in Division M, Title V of the
in manufacturing ($22.9 billion). Brazil’s accumulated
Consolidated Appropriations Act, 2018 (P.L. 115-141).
stock of FDI in the United States, mostly in manufacturing,
was $39.8 billion) in 2018 (by ultimate beneficial owner), a
U.S.-Brazil Trade Relations
decrease of 7.1% from 2017 (see Figure 2).
Despite historical differences in trade policy approaches
between the two countries, U.S.-Brazil trade relations are
Although trade relations were contentious for about twenty
strong and have deepened in the past two decades.
years, there may be opportunity to move toward trade
Although China overtook the United States as Brazil’s
liberalization. Previous Brazilian administrations generally
largest trading partner in 2008, U.S. trade with Brazil has
objected to trade agreements outside of Mercosur and
more than doubled since 1999 (in nominal terms),
pursued trade issues multilaterally at the WTO. The
especially in the energy and aerospace industries. Leading
Bolsonaro Administration’s more open strategy towards the
U.S. export items to Brazil in 2019 included mineral fuels
United States could bring about significant change if it can
and products, aircraft, machinery and mechanical products,
gain enough support within the Brazilian congress.
electrical machinery, and organic chemicals. Leading U.S.
imports from Brazil included mineral fuels and products,
During the Doha Round of WTO multilateral trade
iron and steel, aircraft, machinery and mechanical products,
negotiations that began in 2001, and in the aftermath of
and pulp of wood and similar products.
their breakdown, Brazil has played a critical role in rallying
other developing countries into a powerful bloc within the
Figure 1. U.S. Merchandise Trade with Brazil
WTO. It has been a leading voice in calling for a reduction
in agricultural tariffs in developed nations and in resisting
calls for greater access to developing nations’ services and
industrial sectors. In October 2014, the United States and
Brazil settled a longstanding dispute under the WTO over
U.S. government support for cotton farmers. The United
States has brought four WTO cases against Brazil on issues
related to the automotive sector, import prices, and patent
protection. In March 2019, Brazil agreed to forgo WTO
special and deferential treatment for developing countries
and treat itself as a developed country in exchange for U.S.
support in its effort to join the OECD.

Issues for Congress
Source: CRS using U.S. International Trade Commission data.
While an FTA between the United States and Brazil may
continue to be an elusive proposition in the near term,
Total merchandise trade (exports plus imports) between the
government-to-government dialogues have moved towards
United States and Brazil totaled $73.9 billion in 2019, with
a more collaborative relationship. Congress may consider
$43.1 billion in U.S. exports and $30.9 billion in U.S.
exploring prospects for enhancing economic relations with
imports. The United States has had a trade surplus ($12.2
Brazil, including the possibility of an FTA and U.S.
billion in 2019) with Brazil since 2008 (see Figure 1). It
negotiating priorities. Congress may also examine a
also had a services trade surplus of $22.1 billion in 2018.
framework for furthering trade ties and addressing trade
Merchandise trade peaked in 2012, at $75.9 billion.
issues such technical trade barriers to trade, trade
facilitation, intellectual property rights protection, digital
Figure 2. Stock of U.S.-Brazil Foreign Direct
trade, and anti-corruption measures.
Investment (FDI)
Several U.S. policymakers have expressed increasing
interest in a possible FTA with Brazil, while others contend
that although there is optimism for an agreement, Brazil
must first make strides on pension, tax reform, and
environmental protection efforts before the two countries
could move forward FTA negotiations. (See CRS Report
RL33456, Brazil: Background and U.S. Relations, by Peter
J. Meyer, and CRS In Focus IF10193, The WTO Brazil-U.S.
Cotton Case, by Randy Schnepf).
M. Angeles Villarreal, Specialist in International Trade
and Finance
Andres B. Schwarzenberg, Analyst in International Trade
Source: CRS analysis, Bureau of Economic Analysis (BEA) data.
and Finance

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U.S.-Brazil Trade Relations

IF10447


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https://crsreports.congress.gov | IF10447 · VERSION 6 · UPDATED

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