FX.co ★ Brazilian Real Extends Slide on 50% US Tariffs

The Brazilian real has dropped to over 5.6 per USD, following the broad selloff in Brazilian assets prompted by the U.S. administration's decision to increase tariffs on Brazilian imports by 50%. This action, directed by President Trump, was justified by the Brazilian Supreme Court's investigation of former President Bolsonaro, who is currently facing charges related to an attempted coup. Notably, these tariffs have been raised from a prior rate of 10%, notwithstanding Brazil's sustained trade surplus with the U.S. This tariff escalation is expected to strain foreign exchange inflows from the United States, Brazil's second-largest trade partner, potentially undermining revenues and investments within critical export sectors such as energy, iron, steel, machinery, soy, soft commodities, and the aerospace industry. Earlier this year, the Brazilian real had gained more than 12% in value due to the dollar's weakening and increased attractiveness of the carry trade, following concerns over fiscal policy that led the Central Bank of Brazil to increase its Selic rate to 15%, positioning it as one of the highest real interest rates globally. The central bank plans to maintain this rate since the inflation rate in June remained above target at 5.35%.