Brazil’s president has opened a new front in the trade war by promising to haul the U.S. back to the WTO over its latest steel tariffs. In late March, speaking in Tokyo, Luiz Inácio Lula da Silva warned that President Trump’s revived Section 232 tariffs on Brazilian steel “will raise the prices of goods and could lead to inflation that [he] hasn’t yet realised,” arguing that “protectionism doesn’t help any country in the world.” Lula said Brazil would file a formal WTO complaint and even consider retaliatory measures, noting “we have two decisions to make… One is to appeal to the World Trade Organization… and we can’t just stay quiet.” It was a stark departure from the cautious tone earlier in the month by his ministers, Finance Minister Fernando Haddad had urged calm and talks, but it underscored how seriously Brasilia is taking the 25% levies, which went into effect on March 12.
The tariffs represent a sharp reversal of a 2018 accord. Back then, the previous Trump administration exempted Brazil under a quota deal (up to 3.5 million tonnes of semi-finished steel) in exchange for voluntary limits; however, that arrangement lapsed when President Biden reinstituted blanket 25% duties on steel and aluminum last month. Brazil had become the second-largest supplier of those metals to the U.S. (after Canada), with its exports of semi-finished steel accounting for a significant share of U.S. imports. The Brazilian government reacted publicly by lamenting what it called the “unjustifiable” move by the U.S. and promising to assess all possible responses, from WTO dispute settlement to counter-tariffs on U.S. goods. If past rhetoric is any guide, Brazil could target sensitive exports, such as ethanol or chicken. Lula stressed he still desires “harmonious” trade ties, but warned that any U.S. action “against Brazil… will be met with reciprocity.”
The WTO complaint process, however, is slow and its outcome uncertain. Under WTO rules, Brazil must first request consultations and, failing a negotiated solution, form a dispute panel, a procedure that typically takes many months or longer. 2022 offers a cautionary example: a WTO panel reviewed Trump’s 2018 steel and aluminum tariffs and unanimously ruled they violated global rules, insisting the U.S. bring them into compliance. Washington, however, immediately branded the ruling “flawed” and refused to lift the duties. As one trade lawyer noted, because the U.S. has crippled the WTO’s Appellate Body, any U.S. appeal of an adverse ruling vanishes into a legal void, leaving the tariff in place. USTR officials have signaled exactly that: the U.S. stated it “does not intend to remove the Section 232 duties as a result of these disputes.”
For now, each side is digging in. In Washington, administration spokespeople and industry figures defend the tariffs as vital to national security. They point to alleged global overcapacity and underscore that decisions about defense-related trade are for sovereign governments, not Geneva bureaucrats, to make. As one U.S. steel executive put it bluntly: “The WTO should not get to decide U.S. national security policy.” On the other hand, critics warn that these duties do raise costs. Economists at the Peterson Institute for International Economics (PIIE) have found that broad new U.S. tariffs are likely to slow growth and contribute to higher inflation in the United States, especially if trading partners retaliate with their levies. Even Donald Trump’s goal of “making America wealthy again” is in question: PIIE’s analysis shows retaliatory taxes would hit U.S. manufacturers and farmers, while consumers pay more.
Brazil’s economy would also feel the bite. The country’s steel sector cheered Lula’s defiance, but exporters now face a loss of market share in the United States. At the same time, Brazil’s purchases of U.S. products, from metal-making coal to machinery, could make retaliation domestically painful. Trade data show that the U.S. has already run a modest surplus with Brazil, but a tariff tit-for-tat could widen volatility. Industry analysts note the two economies have a “mutually beneficial” steel relationship: Brazil is the largest source of semi-finished steel to U.S. manufacturers and a major buyer of U.S. coal. Any breakdown threatens supply chains on both sides.
In the end, the WTO gambit may accomplish more in message than mandate. By lodging a formal complaint, Lula underscores Brazil’s objection and forces Washington to defend its actions on the world stage. However, if history is any guide, even a favorable WTO ruling may not alter U.S. policy anytime soon. As a senior U.S. trade official warned last year, national-security decisions “are certainly not something to be assessed by three WTO adjudicators,” and the U.S. has indicated it will ignore negative panel findings. The standoff thus highlights the limitations of international arbitration in today’s trade wars. Without mutual consent or an enforcement mechanism, a WTO win may only strengthen Brazil’s diplomatic position, while leaving tariffs and price pressures firmly in place.
References:
- Tim Kelly and Lisandra Paraguassu, “Brazil’s Lula warns Trump’s tariffs risk inflation, vows WTO challenge on steel,” Reuters, March 27, 2025.
- Reuters, “Brazil hints at WTO complaint, tax on US products after Trump steel tariffs,” Reuters, February 14, 2025.
- Reuters, “Brazil will not retaliate against US steel tariffs immediately, mulls all actions,” Reuters, March 12, 2025.
- Emma Farge and Philip Blenkinsop, “Trump metal tariffs ruled in breach of global rules by WTO,” Reuters, December 9, 2022.
- Association for Iron & Steel Technology (AIST), “WTO Rejects Section 232 Steel and Aluminum Tariffs,” December 9, 2022.
- Warwick J. McKibbin, Marcus Noland, and Geoffrey Shuetrim, “Trump’s tariffs damage the US economy more if they drive investors away from American assets,” Peterson Institute for International Economics, June 25, 2025.
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