President Trump's decision this week to impose tariffs on Brazil has sparked widespread controversy, especially with his description of former Brazilian President Jair Bolsonaro as a victim of a "witch hunt" due to "coup" accusations. This intervention, rather than helping Bolsonaro, has put him in a precarious position and further deepened divisions among his supporters.
Brazilian President Luiz Inácio Lula da Silva has announced that he is seeking a diplomatic solution to Trump's threat of a 50% tariff, but has vowed to retaliate in kind if the tariffs take effect on August 1st. This strong stance is gaining increasing favor from Brazilian voters.
Lula pointed to a recently passed law by Congress that gives the president the power to retaliate against trade barriers, stating: "If they charge us a 50% tax, we will also charge them a 50% tax.""
He also stated that Brazil could survive without trade with the United States and that it would seek alternative partners. He noted that trade with the United States accounts for only 1.7% of Brazil's GDP. In addition, Lula emphasized that Brazil and other countries do not need to continue using the dollar for trade, and can use their national currencies.
Former Brazilian President Bolsonaro, Lula's political opponent, is considered the catalyst for Trump's decision to impose tariffs. Bolsonaro faces a ban from running for office due to legal issues, preventing him from directly competing with Lula. Bolsonaro has openly sought Trump's help in facing "coup attempt" accusations.
Analysts believe that Trump's intervention, ostensibly representing mutual support between nationalists, actually puts Bolsonaro and his followers in a difficult position, and gives Lula an opportunity to portray himself as a defender of Brazil's sovereignty against foreign interference.
After Trump announced his support, Bolsonaro issued a statement reiterating his usual positions, claiming that the tariffs are the result of "Brazil abandoning its commitment to freedom and the rule of law," adding that "this would not have happened in my time."
Given his legal situation, Bolsonaro seems to be hinting at the possibility of a "successor," such as his son Eduardo Bolsonaro, who led a campaign in the United States to persuade the Trump administration to provide assistance, or São Paulo Governor Tarcisio de Freitas, who is considered a potential candidate to challenge Lula in the upcoming elections.
Ultimately, it seems that the Brazilian right is struggling to cope with Lula's strong comeback, who is using Trump's attack to boost his popularity. While Brazil seeks to diversify its trade partners and reduce dependence on the United States and China, some believe that Bolsonaro and Trump are responsible for this situation.
Note: This analysis does not provide investment advice, but aims to understand the political and economic developments and their potential impact on relations between Brazil and the United States.
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