Trump Hits Brazil With 50% Tariff, Orders Unfair Trade Practices Probe

Economic

Summary:

U.S. President Donald Trump turned his trade ire against Brazil on Wednesday, threatening Latin America's largest economy with a punitive 50% tariff on exports to the U.S. and ordering an unfair trade practices investigation that could lead to even higher tariffs.

Trump set the Aug. 1 tariff rate -- far higher than the 10% duty imposed on Brazil on April 2 -- in a tariff letter to Brazilian President Luiz Inacio Lula da Silva, that vented anger over what he called the "Witch Hunt" trial of Lula's right-wing predecessor, Jair Bolsonaro.

Criticizing what he said were Brazil's attacks on free elections and speech and "SECRET and UNLAWFUL Censorship Orders to U.S. Social Media platforms," Trump also ordered the U.S. Trade Representative's office to open an unfair trade practices investigation into Brazil's policies under Section 301 of the Trade Act of 1974.

The probe could lead to further tariffs on Brazilian exports.

Trump's broadside against Brazil came as his administration was inching closer to a deal with its biggest trading partner bloc, the European Union.

Trump earlier on his Truth Social media platform issued Aug. 1 tariff notices to seven minor trading partners: a 20% tariff on goods from the Philippines, 30% on goods from Sri Lanka, Algeria, Iraq, and Libya, and 25% on Brunei and Moldova.

Those countries are bit players in the U.S. trade deficit, accounting for just under $15 billion in U.S. imports in 2024.

Brazil is the 15th largest U.S. trading partner, with total two-way trade of $92 billion in 2024, and a rare $7.4 billion U.S. trade surplus.

But Trump's letter to Lula contained the same language as previous form letters describing Brazil's trading relationship as "very unfair".

The latest letters add to 14 others issued earlier in the week including 25% tariffs for powerhouse U.S. suppliers South Korea and Japan, which are also to take effect August 1 barring any trade deals reached before then.

They were issued a day after Trump said he was broadening his trade war by imposing a 50% tariff on imported copper and would soon introduce long-threatened levies on semiconductors and pharmaceuticals. Trump's rapid-fire tariff moves have cast a shadow over the global economic outlook, paralyzing business decision-making.

NEGOTIATIONS WITH THE EU

Trump said trade talks have been going well with China and the European Union, which is the biggest bilateral trading partner of the U.S.

Trump said he would "probably" tell the EU within two days what rate it could expect for its exports to the U.S., adding that the 27-nation bloc had become much more cooperative.

"They treated us very badly until recently, and now they're treating us very nicely. It's like a different world, actually," he said.

EU trade chief Maros Sefcovic said good progress had been made on a framework trade agreement and a deal may even be possible within days.

Sefcovic told EU lawmakers he hoped that EU negotiators could finalise their work soon, with additional time now from the extension of a U.S. deadline to August 1 from July 9.

"I hope to reach a satisfactory conclusion, potentially even in the coming days," Sefcovic said.

However, Italian Economy Minister Giancarlo Giorgetti had earlier warned that talks between the two sides were "very complicated" and could continue right up to the deadline.

EU officials and auto industry sources said that U.S. and EU negotiators were discussing a range of potential measures aimed at protecting the European Union's auto industry, including tariff cuts, import quotas and credits against the value of EU automakers' U.S. exports.

Shows annual tariff revenue collections

HIGHEST TARIFF LEVELS SINCE 1934

Equity markets shrugged off the Republican president's latest tariff salvo on Wednesday, while the yen remained on the back foot after the levies imposed on Japan.

Following Trump's announcement of higher tariffs for imports from the 14 countries, U.S. research group Yale Budget Lab estimated consumers face an effective U.S. tariff rate of 17.6%, up from 15.8% previously and the highest in nine decades.

Trump's administration has been touting those tariffs as a significant revenue source. Treasury Secretary Scott Bessent said Washington has taken in about $100 billion so far and could collect $300 billion by the end of the year. The United States has taken in about $80 billion annually in tariff revenue in recent years.

The Trump administration promised "90 deals in 90 days" after he unveiled an array of country-specific duties in early April. So far, only two agreements have been reached, with Britain and Vietnam. Trump has said a deal with India was close.

Massachusetts Governor Maura Healey, a Democrat, blasted Trump for his "failed trade war".

"President Trump was elected to lower costs, and all he is doing is raising prices and hurting our businesses," she said in a statement.

Source: Reuters

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Manuel

Commodity

Political

President Trump's threat this week to impose a 50% tariff on U.S. copper imports targets a vital metal that is widely used in many products and industries. That could lead to higher prices for everything from appliances and electronics to cars and home repairs, economists and industry experts said.

Although Mr. Trump has yet to officially announce the metal tariff, the threat alone caused copper prices to shoot up 13% on Tuesday, reaching a record high.

Ryan Young, a senior economist at the Competitive Enterprise Institute, a nonpartisan think tank, said copper is an integral component in electrical wiring and plumbing, as well being used as a heat conductor in radiators and household appliances. He worries that a hefty copper tariff will trigger inflation.

"It's bad news all around," Young said of Mr. Trump's proposed copper tariff. "If companies' costs go up they pass them along to consumers, so we'd see higher prices for home repairs and anything that uses copper."

Copper tariffs could also make maintaining the nation's electric grid more expensive and drive up household energy costs, Young said. "It would negatively affect the electricity industry and anybody who uses electricity."

Mr. Trump has said that tariffs provide financial incentives to ramp up domestic production, including of critical materials like copper, and help create manufacturing jobs.

"America cannot be reliant on foreign imports of the copper that's necessary for key military hardware, infrastructure and everyday electronics," White House Spokesman Kush Desai told CBS MoneyWatch in a statement. "The Trump administration is committed to reshoring manufacturing that's critical [to] our national and economic security with a two-pronged approach of tariffs and a full suite of supply-side reforms like deregulation and the pro-growth tax cuts of The One, Big, Beautiful Bill."

Ripple effects

The biggest users of copper — and therefore most exposed to the tariff increase — include a vast range of industries, covering everything from construction to semiconductors, electric vehicles and renewable energy components such as solar panels, according to industry data.

Daan de Jonge, copper demand and prices lead analyst at Benchmark Mineral Intelligence, said in a research note that "a 50% price hike will have inevitable ripple effects on the cost of new infrastructure, the cost of housing the cost of fridges, cars, air conditioning."

For consumers, that means the cost of appliances such as refrigerators and air conditioners, as well as EVs, would likely rise if this 50% tariff goes into effect, according to analysts.

"Copper is an important element in development of semiconductors and electric vehicles. And the tariff announcement caused prices to go up quite dramatically, so you can tell it's a pretty big deal," Veronique de Rugy, a professor of political economy and senior research fellow at George Mason University's Mercatus Center, told CBS MoneyWatch. "The reason President Trump picked copper is because it's such a big deal for a lot of important things."

Carveouts for key partners?

The U.S. relies heavily on copper imports from Chile, followed by Canada. The U.S.'s net copper imports met 53% of U.S. demand for copper last year, according to Morgan Stanley research.

Experts note that Mr. Trump isn't certain to hike duties on copper, saying his proposal could be aimed more at securing concession from exporters.

"These are two examples of countries that the U.S. could offer some sort of quota or export restraint relief to as part of a broader deal," UBS chief investment strategist Kurt Reiman told CBS MoneyWatch, referring to Canada and Chile. A revamped U.S. trade policy could also include carveouts for foreign copper suppliers, he added

Although the U.S. could ramp up domestic copper production, it would take years to significantly increase output, Reiman said. "We aren't ready. The mines would have to be built out, and that's typically a multi-year process."

The sectoral tariff threats come after Mr. Trump this week announced stiff new tariff rates on 20 nations that have not yet reached trade agreements with the U.S and that he said would take effect on Aug. 1. He outlined the new rates, posted in nearly identical letters on his Truth Social social media platform, as a 90-day pause on so-called "reciprocal" levies was set to expire on Wednesday.

Source: CBS News

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Stocks

Wall Street indexes closed higher on Wednesday, led by the tech-heavy Nasdaq as Nvidia briefly reached a $4 trillion valuation, and Federal Reserve meeting minutes fueled hopes that inflation pressures from President Donald Trump's tariffs would not derail interest rate cuts this year.

The minutes for the mid-June meeting showed that most Fed officials said they expect rate cuts will be appropriate later this year, with price shocks from Trump's import taxes expected to be "temporary or modest." However, there was little support for a rate cut at the end of July meeting.

Nvidia (NVDA.O), became the world's first company to hit a $4 trillion market value on Wednesday morning, solidifying its position as one of Wall Street's most favored stocks to tap in the ongoing surge in demand for artificial intelligence technologies. Shares in the chip company ended Wednesday up 1.8% with a market capitalization of around $3.97 trillion.

It helped lift the Nasdaq, which closed at an all-time high.

While concerns about tariff-induced inflation pressure did not stop Wall Street from hitting fresh record highs last week, Chris Zaccarelli, chief investment officer for Northlight Asset Management, noted that they have caused the Fed to pause interest rate hikes.

"Fed officials suggested that they believe inflation will be higher down the road. At the same time, many or most officials suggested that they expect lower interest rates at some point this year. Those two things don't match," said Chris Brigati, chief investment officer at SWBC, an investment company in San Antonio, Texas. "Perhaps they're starting to put a little bit more weight into what's going on with the labor market."

Besides Nvidia, other market boosts came from megacap companies including Microsoft Corp (MSFT.O), which rose 1.4% and Amazon.com (AMZN.O), which added 1.5%.

"There's definitely a megacaps bias. ... To some extent it's a flight to safety but not what you would traditionally think of as a safety trade," said Kevin Gordon, senior investment strategist at Charles Schwab. "From a trade standpoint it's not like you're getting much clarity."

While Wall Street indexes had fallen on trade jitters on Monday, they have steadied since then, with analysts noting that investors have become used to Trump's pattern of saber-rattling on tariffs. And with the deadline for the latest tariffs pushed to August 1, many are betting that negotiations will defuse the trade war.

Trump issued letters to seven countries on Wednesday, calling for tariffs of 30% on Algeria, Iraq, Libya and Sri Lanka, 25% on Brunei and Moldova, and 20% on the Philippines. The European Union has said it could reach an outline trade agreement with the U.S. in the coming days.

On Tuesday, Trump had ramped up his trade offensive with the announcement of a 50% tariff on copper and a vow to slap long-threatened levies on semiconductors and pharmaceuticals. On Monday, Trump hit 14 trading partners with a fresh wave of tariff warnings, including Japan and South Korea.

"The market is becoming a little desensitized to the bad news of tariffs. ... You had three months of still constructive growth and things have not been that bad so the market's saying maybe we can get through these tariffs," said SWBC's Brigati.

The Dow Jones Industrial Average (.DJI),rose 217.54 points, or 0.49%, to 44,458.30, the S&P 500 (.SPX), gained 37.74 points, or 0.61%, to 6,263.26 and the Nasdaq Composite (.IXIC), gained 192.87 points, or 0.95%, to 20,611.34.

Eight of the 11 S&P 500's major industry sectors advanced, led by utilities (.SPLRCU), up 1%, and technology (.SPLRCT), up 0.9%. Consumer staples (.SPLRCS), often seen as a more defensive sector, was the biggest loser, ending down 0.6%.

After last week's record closes for the S&P 500 and the Nasdaq - buoyed by a surprisingly robust jobs report - investors are turning their attention to Thursday's initial jobless claims for the next pulse check on the labor market.

Among individual stocks, AES Corp (AES.N), rallied 19.8% after Bloomberg reported that the power provider was exploring options, including a sale.

Boeing (BA.N), shares advanced 3.7% as Susquehanna raised its price target after the planemaker reported on Tuesday that its airplane deliveries in June increased 27% on a yearly basis.

UnitedHealth Group (UNH.N), shares slipped 1.6% after the Wall Street Journal reported that the U.S. Department of Justice was investigating how the health insurer deployed doctors and nurses to gather diagnoses that increased its Medicare payments.

Advancing issues outnumbered decliners by a 2.17-to-1 ratio on the NYSE where there were 280 new highs and 39 new lows on the NYSE.

On the Nasdaq, 2,988 stocks rose and 1,551 fell as advancing issues outnumbered decliners by a 1.93-to-1 ratio.

The S&P 500 posted 20 new 52-week highs and six new lows while the Nasdaq Composite recorded 72 new highs and 44 new lows.

On U.S. exchanges, 18.10 billion shares changed hands compared with the 18.35 billion average for the last 20 sessions.

Source: Reuters

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Cryptocurrency

Political

A top U.S. securities regulator known for her supportive stance on the cryptocurrency industry said on Wednesday that new models for trading securities known as "tokenization" must still meet regulations for other securities.

Hester Peirce, a Republican commissioner on the Securities and Exchange Commission who has been nicknamed "crypto mom," said in a statement: "As powerful as blockchain technology is, it does not have magical abilities to transform the nature of the underlying asset. Tokenized securities are still securities."

Tokenizing equities is a process by which shares of a company are converted into a digital token, similar to how cryptocurrencies are traded. Instead of holding the securities directly, investors hold tokens that represent ownership of the securities.

Such tokens could be created by the security issuer itself, or by an entirely unrelated third party. Anyone who buys a third-party token could face unique risks, she said.

Crypto firms and others have been increasingly discussing the prospect of tokenizing securities as a new way to facilitate trading. Coinbase recently told Reuters it was seeking a U.S. green light from the SEC to offer blockchain-based stocks.

SEC Chairman Paul Atkins, also a Republican, said in a CNBC interview last week that the agency should encourage innovation when asked about the prospect of tokenizing securities.

Critics say the new technology could become a way to evade SEC oversight and expose retail investors to new risks.

Source: Reuters

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Central Bank

Bond

Financial market participants have pushed out yet again the end date for the effort to shrink the size of the Federal Reserve's large balance sheet, the minutes of the U.S. central bank's June 17-18 policy meeting showed on Wednesday.

The drawdown of the Fed's stock of bonds is now expected to stop in February when the balance sheet stands at $6.2 trillion, big banks and money funds told the U.S. central bank ahead of last month's policy meeting, the minutes noted. That represents a small shift from what survey respondents said ahead of the Fed's policy meeting in early May, when they eyed a January end date, and $6.125 trillion in total holdings.

The Fed has been shrinking the size of its balance sheet since the summer of 2022 in an effort referred to as quantitative tightening, or QT. The central bank has allowed set amounts of bonds it bought during the COVID-19 pandemic to mature and not be replaced, in an effort that so far has taken the overall stock of cash and bonds it holds from a record $9 trillion to the current level of $6.7 trillion.

The Fed more than doubled its bond holdings to stabilize markets and then provide stimulus to the economy beyond what could be delivered by near-zero short-term rates. The QT program has been aimed at removing excess levels of liquidity from the market as part of a broader monetary policy normalization, but there's been ongoing uncertainty when that process could end, and at what level of holdings the Fed would be able to rest at.

For some time, market participants have expected the Fed to stop QT this year. But earlier in 2025 the Fed slowed QT in order to reduce the risk of market disruptions while the Treasury Department took action to deal with government financing needs during wrangling over the government's official borrowing limit and its broader budget needs.

Much of that uncertainty was resolved last week with the passage of a Trump administration budget bill that lifted the borrowing cap, which will allow the Treasury to sell more debt. Increased debt sales will cut into the reserve levels the Fed has been trying to shrink with QT.

The reserves now stand at around $3.3 trillion, a level that's been steady for some time. The minutes released on Wednesday said market participants told the Fed they see reserves dipping to $2.9 trillion due to QT. Respondents also said the Fed's reverse repo facility, which held $227 billion on Wednesday, should move to a "low" level.

Source: Reuters

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Cryptocurrency

Political

A group of US Democratic senators has introduced a new bill to sanction El Salvador’s President Nayib Bukele and members of his administration.

The legislation, titled the El Salvador Accountability Act (S.2058), was put forward by Senators Chris Van Hollen, Tim Kaine, and Alex Padilla.

If passed, the bill would require President Donald Trump to impose sanctions over alleged human rights violations and the misuse of Bitcoin by the Salvadoran government.

Bill details

The proposed legislation accuses El Salvador’s government of violating internationally recognized human rights, particularly through the country’s ongoing state of exception.

Due to this, it calls for sanctions on President Bukele, members of his cabinet, and other individuals working on behalf of the government—including political party officials and leaders of government institutions—based on credible information of misconduct.

The bill proposes strong penalties, including freezing US-held assets, visa denials, and suspending financial aid.

The lawmakers argue that Salvadoran institutions have committed these violations while benefiting from US taxpayer dollars.

The bill also requires the president to provide annual updates, beginning with a detailed report on sanctioned individuals within 90 days of its passage.

Meanwhile, the legislation also directs the US Secretary of State to submit a comprehensive report about El Salvador’s crypto use within 90 days of the bill’s enactment.

This report must outline how Salvadoran officials have allegedly used Bitcoin and other digital assets to engage in corruption, evade sanctions, and misuse government resources.

It should include an estimate of how much public funding El Salvador has spent on Bitcoin acquisitions, identify the exchanges used for those purchases, list associated wallet addresses, and highlight any actors with access to the funds.

Additionally, the report must evaluate potential loopholes in El Salvador’s crypto strategy that could be exploited for illicit purposes, including efforts to bypass international financial sanctions.

Bukele’s response

In response to the bill, President Bukele dismissed the US lawmakers’ attempt to impose sanctions on him and his government.

On June 8, Bukele mocked the proposal in a post on X (formerly Twitter), suggesting that the lawmakers’ efforts were fueled by frustration.

This reaction is not surprising, given the growing relationship between the two presidents. This includes their collaboration on El Salvador’s efforts to combat criminal gangs and their shared pro-crypto stance.

President Trump invited Bukele to the White House in April to discuss US immigration support. Two months later, Trump’s advisor, Bo Hines, met with Bukele to explore potential crypto partnerships.

Source: Cryptoslate

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Economic

Central Bank

Only "a couple" of officials at the Federal Reserve's June 17-18 meeting said they felt interest rates could fall as soon as this month, with most policymakers remaining worried to some degree about the inflationary pressure they expect to come from President Donald Trump's use of import taxes to reshape global trade.

Trump has demanded immediate cuts, and called for Fed Chair Jerome Powell to resign, but the minutes showed only narrow support for a reduction in borrowing costs among the Fed's 19 policymakers.

"Most participants" at the Fed's meeting did anticipate rate cuts would be appropriate later this year, with any price shock from tariffs expected to be "temporary or modest," said the minutes, which were released on Wednesday.

The document covered the deliberations at the U.S. central bank's Federal Open Market Committee meeting last month, at which officials unanimously voted to keep the benchmark interest rate in the 4.25%-4.50% range set last December.

"Participants generally agreed that, with economic growth and the labor market still solid and current monetary policy moderately or modestly restrictive, the Committee was well positioned to wait for more clarity on the outlook for inflation and economic activity," the minutes said. Fed Minutes Show Narrow Support for Rate cut Later This Month_1

Fed Minutes Show Narrow Support for Rate cut Later This Month_1

While many policymakers agreed rate cuts might be appropriate later this year, there was broad division about the outlook.

"Some participants ... saw the risk of elevated inflation as remaining more prominent," the minutes said. Seven policymakers in projections issued after the June meeting anticipated no rate cuts this year.

"A few participants saw risks to the labor market as having become predominant," the minutes stated.

But officials seemed, in large part, wary to change monetary policy while so much remained up in the air about the final tariff rates that Trump intends to impose and how businesses and consumers will respond.

Fed officials "agreed ... it remained appropriate to take a careful approach in adjusting monetary policy," according to the minutes.

The comments in the minutes were reflected in the interest rate projections issued after the two-day meeting, with the median rate outlook pointing to two quarter-percentage-point cuts by the end of 2025. Investors expect an initial cut at the Fed's meeting in September and a second one in December.

Fed Governor Christopher Waller and Fed Vice Chair for Supervision Michelle Bowman have since said they felt rates could fall as soon as the July 29-30 meeting, but a recent stronger-than-expected jobs report has led investors to put the odds of an imminent rate cut at close to zero.

Powell's term as Fed chief lasts until May 15.