Why Brazil may target US patents instead of imposing counter-tariffs

The Brazilian government is preparing a potentially far-reaching response to new United States tariffs, with officials considering restrictions involving pharmaceutical patents, agricultural seed protections and payments to United States audiovisual companies instead of relying solely on counter-tariffs.

The United States will impose an additional 25% tariff on a wide range of Brazilian goods from July 22, 2026, after the Office of the United States Trade Representative concluded a year-long investigation into Brazilian trade and regulatory practices. Coffee, beef, oranges, orange juice, selected oil and natural gas products and aerospace components are among the products exempted from the new measure.

Brazil estimates that the tariffs will affect approximately 18% of its exports to the United States, representing about $7.4 billion in annual trade. Brazilian President Luiz Inácio Lula da Silva has authorised preparations under Brazil’s economic reciprocity law, although no final retaliatory package had been announced by July 17.

The emerging strategy is designed to place pressure on commercially important United States interests without increasing the cost of imported machinery, industrial inputs or consumer goods inside Brazil. The dispute is also becoming increasingly political as both governments accuse the other of failing to negotiate in good faith ahead of Brazil’s October presidential election.

Why did the United States impose a new 25% tariff on Brazilian products from July 22?

The Office of the United States Trade Representative imposed the tariffs under Section 301 of the Trade Act of 1974, a law that allows the United States to investigate foreign policies considered unreasonable, discriminatory or harmful to United States commerce.

The investigation began in July 2025 and examined Brazilian policies involving digital trade, electronic payment services, tariffs, anti-corruption enforcement, intellectual property protection, ethanol market access and illegal deforestation.

The Office of the United States Trade Representative concluded in June 2026 that several Brazilian policies burdened or restricted United States companies. The agency then conducted a consultation process, received written submissions and held a public hearing before confirming the tariff action.

United States officials argue that Brazil has disadvantaged foreign digital and payment companies, granted preferential tariffs to products from selected trading partners and failed to provide sufficient protection against counterfeit goods and intellectual property violations.

The United States has also criticised Brazil’s ethanol tariff policies. Washington maintains that Brazilian treatment of United States ethanol does not reflect the relatively low duty applied by the United States to Brazilian supplies.

Brazil disputes the overall assessment and argues that the United States has maintained a goods trade surplus with Brazil for years. Brasília therefore questions the justification for presenting the relationship as one in which Brazilian trade practices have produced a one-sided commercial advantage.

The tariffs are intended to remain in place until the United States determines that Brazil has addressed the practices identified in the Section 301 investigation. The measure therefore creates a negotiating mechanism as well as an immediate trade barrier.

Which Brazilian exports are affected and why were coffee, beef and aerospace products exempted?

The additional tariff applies broadly to Brazilian goods but contains important exemptions intended to protect United States consumers and supply chains.

Coffee, beef, oranges and orange juice were excluded because the United States depends heavily on imports for those products or cannot produce sufficient domestic volumes to meet demand. Applying another 25% tariff could have increased food prices during a period of wider inflationary pressure.

Selected oil and natural gas products were also exempted. Energy markets remain sensitive because of the United States-Iran conflict and disruption around the Strait of Hormuz. The United States administration appears reluctant to introduce a tariff that could increase domestic fuel or industrial energy costs.

Aerospace parts and components received exemptions because Brazilian and United States manufacturers operate through interconnected supply chains. Tariffs on specialised components could interrupt aircraft maintenance and production inside the United States.

The exemptions significantly reduce the immediate impact on some of Brazil’s most recognised exports. However, machinery, metals, chemicals, processed foods, manufactured products and other industrial goods may still face the additional duty.

Brazilian Foreign Minister Mauro Vieira said the affected trade represents approximately 18% of Brazil’s exports to the United States. The remaining Brazilian exports are either exempted, outside the final tariff list or subject to different trade arrangements.

The practical impact will vary by sector. Products with high profit margins or limited competition may absorb part of the tariff. Goods facing strong competition from suppliers in other countries could lose market share quickly because importers can switch sources.

Brazilian companies may also redirect products towards Europe, Asia, Latin America or the Middle East. That strategy can reduce dependence on the United States but may require lower prices, new certifications and different logistics arrangements.

How could Brazil use its economic reciprocity law without increasing prices for Brazilian consumers?

Brazil’s economic reciprocity law allows the government to respond when another country adopts unilateral measures that damage Brazilian competitiveness or interfere with international trade commitments.

Possible responses can include restrictions on trade, investment, services and intellectual property. The law gives the government broader options than simply placing tariffs on imported goods from the offending country.

Vice President Geraldo Alckmin has described the law as an instrument for defending Brazilian economic interests rather than an automatic retaliation mechanism. Luiz Inácio Lula da Silva will decide whether and how the law is activated after reviewing the available measures.

Brazilian officials appear cautious about imposing tariffs on United States products because Brazilian industries depend on imported machinery, technology, chemicals, components and other inputs. Higher duties could increase production costs and contribute to inflation.

The government is therefore examining measures that affect United States commercial interests without directly raising the price of physical imports. Intellectual property protections, royalty payments and audiovisual revenues are among the areas under discussion.

This strategy could create leverage because United States companies derive significant income from patents, licensing, streaming, entertainment content, software and branded technologies.

The legal and economic risks are substantial. Restricting intellectual property rights could discourage investment or create disputes over Brazil’s obligations under international agreements.

The government must also consider whether a measure can be reversed quickly if negotiations succeed. A targeted restriction that can be suspended may offer greater diplomatic flexibility than a tariff affecting thousands of importers and consumers.

Why are pharmaceutical patents, agricultural seeds and United States audiovisual companies under consideration?

Pharmaceutical patents and agricultural seed protections represent commercially valuable United States intellectual property inside Brazil.

Suspending or limiting selected patent rights could permit Brazilian producers to manufacture products without the normal licensing arrangements. Such a measure would create significant pressure on patent holders, particularly when the protected product generates substantial revenue in the Brazilian market.

The government is also examining possible restrictions involving agricultural seed technology. Brazil is one of the world’s largest agricultural producers, and farmers use patented seeds and crop technologies supplied by multinational companies.

Changes to intellectual property protections could affect licensing fees, access to technology and relationships between Brazilian farmers and international seed developers.

United States audiovisual companies are another possible target. Brazil could restrict dividend and royalty remittances or impose additional conditions on companies earning revenue from films, television, streaming and related content.

Audiovisual measures may be politically attractive because they target highly visible United States companies without directly taxing essential Brazilian imports. They could also be calibrated through financial or regulatory rules rather than a complete market ban.

None of these measures had received final approval by July 17. They remain options considered during government discussions, and the final package may be narrower.

Brazil must evaluate the potential domestic consequences. Patent changes affecting medicines could alter availability, investment and regulatory relationships. Seed restrictions could disrupt planting plans or access to agricultural technology. Audiovisual controls could affect Brazilian creative workers and production partners as well as United States companies.

The final decision is therefore likely to focus on measures that create negotiating pressure while limiting disruption to Brazilian employment, consumers and industrial production.

How has the tariff dispute become connected to Brazil’s October presidential election?

The United States tariff decision has entered Brazil’s presidential campaign because Luiz Inácio Lula da Silva and Senator Flávio Bolsonaro have accused each other of contributing to the deterioration in bilateral relations.

Luiz Inácio Lula da Silva argues that the tariffs reflect political pressure and an attempt to influence Brazilian affairs. The Brazilian president has presented the dispute as a question of sovereignty and Brazil’s right to determine its economic and regulatory policies.

Flávio Bolsonaro argues that the government failed to negotiate effectively and allowed disagreements with Washington to escalate into tariffs that could damage Brazilian exporters.

The political conflict is intensified by Flávio Bolsonaro’s relationship with former Brazilian President Jair Bolsonaro and the Bolsonaro family’s connections with supporters of Donald Trump.

United States Secretary of State Marco Rubio accused Luiz Inácio Lula da Silva of failing to negotiate in good faith and placing personal considerations ahead of an agreement. Mauro Vieira rejected the criticism and described the language directed at the Brazilian president as unacceptable.

The disagreement means that a trade dispute involving tariffs, digital regulation and ethanol is now also being interpreted through Brazil’s electoral contest.

Luiz Inácio Lula da Silva may gain politically if Brazilian voters view the tariffs as external interference. Flávio Bolsonaro may benefit if exporters, manufacturers and workers blame the government for failing to prevent the measure.

The economic impact before the election could shape the political result. Job losses, cancelled orders or currency pressure would strengthen criticism of the government. A negotiated settlement or an effective support package could reinforce the president’s claim that Brazil defended its interests.

What role could the World Trade Organization play in Brazil’s response to the United States?

Brazil is considering reviving a dispute at the World Trade Organization concerning United States customs treatment of electronic transmissions.

The dispute could provide Brazil with an additional legal channel separate from the domestic reciprocity law. A favourable ruling could strengthen Brazil’s justification for countermeasures under international trade rules.

World Trade Organization litigation is generally slower than the tariff implementation timetable. The United States duties begin on July 22, while a dispute may require consultations, panel proceedings and possible appeals or compliance discussions.

The value of the process is therefore partly strategic. Brazil can demonstrate that it is pursuing institutional remedies rather than relying exclusively on unilateral retaliation.

The United States may argue that its Section 301 tariffs are a lawful response to Brazilian practices that burden United States commerce. Brazil may argue that unilateral tariffs violate agreed tariff commitments or bypass multilateral dispute settlement procedures.

The conflict also highlights the weakened condition of global trade governance. Major economies increasingly use domestic laws to impose tariffs while pursuing negotiations outside the World Trade Organization system.

Brazil has traditionally supported multilateral trade rules because medium-sized and emerging economies benefit when disputes are decided through common procedures rather than economic power alone.

A World Trade Organization case could attract interest from other governments facing United States Section 301 investigations. The outcome may influence whether those countries negotiate bilateral concessions or prepare coordinated legal challenges.

Which Brazilian industries face the greatest risks and what support is Brasília preparing?

Brazilian exporters affected by the tariff face a direct loss of price competitiveness from July 22.

A Brazilian product previously sold for $100 before ordinary duties may face an additional $25 tariff. The importer must then decide whether to absorb the cost, demand a lower price from the Brazilian supplier or pass the increase to the customer.

Small and medium-sized exporters are particularly vulnerable because they may depend on a limited number of United States buyers and lack the resources to develop alternative markets quickly.

Manufacturers with specialised products may have greater protection if United States customers cannot easily find substitutes. Commodity-like products face higher switching risk because buyers can source similar goods from other countries.

Brazilian exports to the United States had already fallen by 13% during the first half of 2026, while Brazil’s overall exports increased. The divergence suggests that companies were already experiencing weaker demand or redirecting trade before the new tariff took effect.

Finance Minister Dario Durigan said the government plans to announce credit lines and other support measures for affected sectors by early August. The support is expected to revive elements of an earlier programme used during previous tariff pressure.

The government wants to target assistance rather than provide broad subsidies. Possible measures could include working capital, export financing, credit guarantees, tax relief or support for entering new markets.

Dario Durigan has also indicated that the government intends to maintain its fiscal targets. That commitment is important because a large compensation package could increase concerns about Brazilian public finances and inflation.

The support package will need to distinguish between temporary liquidity problems and permanent loss of competitiveness. Credit can help a company survive cancelled orders, but it cannot restore demand if United States buyers permanently replace Brazilian suppliers.

Could the Brazil and United States tariff dispute become a wider test of global trade rules?

The dispute matters beyond the immediate value of affected Brazilian exports because it demonstrates how the United States is rebuilding its tariff strategy after legal setbacks involving earlier measures.

The United States Supreme Court limited the administration’s use of emergency economic powers for sweeping tariffs. The Brazil measure relies instead on Section 301, which provides a more established investigative and procedural framework.

Other countries may now face similar actions based on digital regulation, tariffs, industrial policies, environmental enforcement or intellectual property practices.

Brazil’s response could establish an alternative model for retaliation. Instead of matching goods tariffs with goods tariffs, governments may target patents, licensing income, digital services and royalty payments.

That approach would expand trade conflicts into sectors that were previously less exposed to tariff disputes. Technology, pharmaceuticals, media and agricultural biotechnology could become bargaining tools even when the original dispute concerns physical goods.

The risk is a cycle in which tariffs produce intellectual property restrictions, which then produce additional sanctions or tariffs. Companies could face uncertainty across several legal systems without a clear route to settlement.

The United States and Brazil still have incentives to negotiate. The United States has a longstanding goods trade surplus with Brazil, while Brazilian companies value access to the United States market. Both countries cooperate in energy, agriculture, aviation, investment and regional diplomacy.

A settlement would require Brazil to address at least some of the practices identified in the Section 301 investigation, while the United States would need to offer a credible pathway for reducing or removing the tariff.

Until that process begins, the July 22 implementation deadline will place increasing pressure on exporters and governments. Brazil’s final choice of countermeasures will determine whether the dispute remains a controlled trade negotiation or develops into a broader political and economic confrontation.

What are the key takeaways from Brazil’s response to the new United States tariffs?

• The United States will impose an additional 25% tariff on a wide range of Brazilian goods from July 22, 2026, after a Section 301 investigation covering digital trade, tariffs, intellectual property, ethanol and other policies.
• Coffee, beef, oranges, orange juice, selected energy products and aerospace components are exempted because tariffs on those goods could create supply shortages, disrupt United States industries or increase consumer prices.
• Brazil estimates that the tariff will affect approximately 18% of its exports to the United States, representing about $7.4 billion in trade, although the impact will vary significantly across industries and individual products.
• Luiz Inácio Lula da Silva is preparing a response under Brazil’s economic reciprocity law, but no final countermeasure package had been approved or announced by July 17, 2026.
• Measures under consideration include restrictions involving pharmaceutical patents, agricultural seed protections and dividend or royalty payments by United States audiovisual companies, rather than immediate tariffs on imported United States goods.
• Brazilian officials prefer measures that pressure United States commercial interests without increasing the cost of industrial inputs, machinery and consumer goods or adding to domestic inflation.
• Brazil is also considering reviving a World Trade Organization dispute over electronic transmissions, creating a multilateral legal track alongside possible action under its domestic reciprocity law.
• The dispute has entered Brazil’s October presidential campaign, with Luiz Inácio Lula da Silva and Flávio Bolsonaro blaming each other for the tariff escalation and its potential effect on exporters and employment.