Brazil stocks fell Thursday, while the iShares MSCI Brazil ETF flashed a sell signal after President Donald Trump said Brazilian imports would be slapped with a 50% tariff over political concerns.
The Bovespa stock index fell 0.6% Thursday afternoon. Mining company Vale, the index's largest component, was down 1%. Its U.S.-traded shares were up 1.4%, however.
The iShares Brazil ETF suffered a blow. Shares gapped below the 50-day moving average in heavy volume. That's considered a sell signal, and one coming just seven sessions after the ETF made a bullish move. The ETF broke out of a flat base with a 28.45 buy point on June 30, adding to a rebound from a low of 22.26 in January.
The $5.239 billion ETF slid after Trump announced the initial round of tariffs in early April. But the fund made up those losses in a few weeks. It is still up 25% year to date, outperforming the S&P 500. The Bovespa index is up 13.5%, about doubling the S&P 500.
Nu Holdings, the largest position in the Brazil ETF, slid more than 5% in active trading. The banking app company remained above its 50-day line but has been meeting resistance around 14 all year.
Aircraft and defense manufacturer Embraer fell as much as 10% but pared its loss to 4.6% Thursday afternoon. The stock this month erased nearly an entire 22% gain from a June 16 breakout at 50.45.
Brazil Tariffs Hit Banks, Oil Company
Itau Unibanco gapped below its 50-day line in heavy trading, also flashing a sell signal. Banco Bradesco was off 3.4%.
Oil company Petrobras fell about 1%. It has been trending lower since February 2024. Beverage company Ambev fell 2.5% and continued to form a flat base.
MercadoLibre, whose largest market is Brazil, fell nearly 3% and also broke its 50-day moving average.
Futures of coffee and orange juice — two commodities that Brazil exports to the U.S. — rose in Thursday trading. Orange juice futures rallied 6%, while coffee spiked briefly and was little changed in afternoon trading, according to FactSet.
Oil, soybeans, steel and aluminum account for 40% of Brazilian exports to the U.S., according to a research note from UBS. Steel and aluminum imports already have a 25% tariff. Soybean futures for July delivery erased earlier losses and were little changed. West Texas Intermediate crude oil fell 2.5% to $66.65 a barrel.
Brazil Tariffs Aimed At Politics
In announcing the tariffs, Trump alleged that Brazil's government was conducting a "witch hunt" in pursuit of former President Jair Bolsonaro. Bolsonaro is accused of trying to overthrow the government. Trump also accused Brazil of attacking Americans' free speech rights.
By using politics as the justification for tariffs, Trump opened a new front in the trade war. The U.S. has a modest trade surplus with Brazil, and only a 10% baseline tariff was expected. Brazil's leaders promised to fight back.
"The action against Brazil sets a scary precedent, insofar as it is the first time that Trump's tariffs are intended to influence (ostensibly) a country's internal political and judicial settings," Thierry Wizman, Global FX & Rates Strategist at Macquarie Group, wrote in a note to clients.
Trump's move could backfire, Wizman added, making it easier for President Luiz Inácio Lula da Silva to win reelection in 2026.
Wizman said another motivation is Lula's closer ties with China. The 50% tariffs were announced just after a BRICS summit in which participants discussed how to further reduce the prominence of the U.S. dollar in international transactions.
China has become Brazil's largest trading partner, according to UBS. About 12% of Brazil's exports go to the U.S.
