Brazil formally requested WTO consultations with the United States on 27 July, opening a dispute over two new tariff measures that took effect within the preceding week. The first, a 25 per cent surcharge on a range of Brazilian goods, entered into force on 22 July following a country-specific investigation into policies on digital payments, intellectual property, anti-corruption enforcement and deforestation. The second, a 12.5 per cent levy applied from 24 July, stems from a broader inquiry covering 60 economies and penalises what Washington describes as inadequate bans on imports of goods produced with forced labour. Combined, the tariffs reach 37.5 per cent on some product lines, covering an estimated 16.5 per cent of Brazil’s exports to the US, worth roughly $6.6bn.

The measures rest on Section 301 of the US Trade Act of 1974, a tool the Trump administration has revived to bypass the constraints imposed by a Supreme Court ruling in February 2026 that struck down earlier emergency-based tariffs. Viewed from Washington, the levies are a corrective to unfair practices: the US Trade Representative’s office argues that Brazil’s instant-payment system Pix and other policies disadvantage American firms, while the forced-labour tariff is framed as levelling the playing field for US workers. Yet the design of the forced-labour action reveals a negotiating calculus. Analysts in New Delhi note that the tariff rate varies by country, with lower rates for economies that have trade deals with Washington or, as in India’s case, that issued a notification banning forced-labour imports. This has led to assessments that the primary objective is less about labour standards than about creating leverage for bilateral agreements.

For Brazilian exporters, the impact is immediate and uneven. Micro and small enterprises, which account for 40 per cent of the companies selling to the US but only 1.6 per cent of the export value, are particularly exposed because they often lack the margins to absorb the cost or the flexibility to redirect goods tailored to American tastes. One apparel exporter reported that a bikini model jumped from $36 to $60 in the US market. Bilateral trade flows are already contracting: data from the American Chamber of Commerce in Brazil show a 14.3 per cent year-on-year decline in the first five months of 2026. The government in Brasília calls the tariffs “unjustified and inconsistent” with GATT 1994 and the WTO’s dispute settlement rules, but the move is widely seen as symbolic. The WTO’s Appellate Body has been paralysed since 2019 because of US blocking of judicial appointments, meaning any eventual panel ruling could be appealed into a void.

The consultation request marks the first procedural step in a dispute that is unlikely to reach a binding resolution. Brazil took a similar path in 2025 after an earlier tariff round, which was later invalidated by the US Supreme Court. This time, the legal basis is different, and the political context more entrenched. The next factual milestone will be whether the two sides enter consultations within the WTO’s 30-day window and whether Brazil activates its domestic reciprocity law to impose countermeasures. Meanwhile, the US has signalled that further Section 301 investigations—including one on excess industrial capacity—are under way, keeping open the prospect of additional tariff layers.