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Investing.com - Brazilian financial markets showed resilience following the announcement of potential 50% US tariffs, with the Brazilian real recovering half of Wednesday evening’s losses.
Brazil’s relatively low export exposure has helped limit market damage, with exports representing only about 18% of GDP compared to 30-35% for Mexico and Chile. Only approximately 10% of Brazilian exports go to the United States, primarily in energy and industrial metals sectors, while China remains Brazil’s largest export market.
The Brazilian equity market declined less than one percent despite the tariff news, suggesting investors may be speculating about whether the proposed 50% tariff rate will remain permanent or could be reduced through negotiations between President Luiz Inácio Lula da Silva and President Trump.
The Brazilian real has delivered an 11% spot gain and 19% total return against the US dollar this year, supported by Brazil’s 15% interest rate and a relatively favorable external environment after Trump shifted toward deal-making on tariffs.
While a return to the recent 5.40 low in USD/BRL appears unlikely this quarter given the more challenging external environment, analysts do not anticipate a sharp spike through 5.75 and expect the real to outperform the steep forward curve this summer.
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