By Devika Madhusudhanan Nair and Shubham Kalia
July 15 (Reuters) - The U.S. has announced 25% duties on many imports from Brazil, while unveiling a broader-than-expected list of exemptions, reviving a trade war that could embroil dozens of countries around the world as the Trump administration reworks its tariffs policy, one of its signature diplomatic tools.
The late-night announcement by the office of the U.S. Trade Representative made Brazil the first country targeted under the Trump administration's new tariff strategy, which relies on Section 301 of U.S. trade law, a provision that authorizes investigations into alleged unfair trade practices, to justify new levies on dozens of countries.
The new tariffs, which are expected to take effect on July 22, could eventually ensnare countries from India and China to the EU, Japan and South Korea as President Donald Trump seeks a trade reset after the U.S. Supreme Court struck down a previous round of global levies.
Wednesday's announcement by the USTR office follows months of fruitless negotiations and over 30 meetings between U.S. and Brazilian officials after the Trump administration proposed new tariffs on many imports from Brazil in June, saying its practices were unfair on a range of issues from digital trade to illegal deforestation.
"Extensive negotiations with Brazil over the past year have not resolved these issues, but we remain open to continuing negotiations with Brazil to bring about long-needed changes to the problems identified in this investigation," U.S. Trade Representative Jamieson Greer said in a statement.
Brazilian President Luiz Inacio Lula da Silva, who is expected to run for reelection in October, said the U.S. decision was without any justification. Brazilian officials have long suggested, in private conversations, that the motives for the new tariffs were political rather than technical, making negotiations fruitless.
Brazil would immediately begin proceedings to invoke instruments provided for under the "Reciprocity Law" and revisit the matter within the framework of the WTO dispute settlement mechanism, he said in a statement.
India, one of the biggest trading partners of the U.S., has struggled to sign a trade deal with Washington at least partly because of the Section 301 investigations.
“The Brazil case...is a warning for India," said Ajay Srivastava, founder of the Global Trade Research Initiative think tank. "It shows that Washington can use trade action not only over tariffs and market access, but also against any policy it sees as unfair to U.S. business."
'LULA HAS PUT HIS OWN EGO AHEAD OF MAKING A DEAL'
Secretary of State Marco Rubio, who was accused by Lula of being anti-Latin America when the U.S. tariffs were proposed in June, blamed the Brazilian president and said "Lula and his government have not negotiated with the US in good faith."
"For the past year, Lula has put his own ego ahead of making a deal for the welfare of the Brazilian people, and these tariffs are the price for that," Rubio said in a strongly worded post on X.
The Brazil tariffs would apply to thousands of imports, including sugar, agricultural machinery, apparel, electrical machinery, paper and steel.
Still, the U.S. said it would exempt all the products proposed for exemption in the June notice, except high-purity dissolving pulp and non-pharmaceutical applications of certain products, and include hundreds of others that were expected to face levies, such as pig iron and unflavored instant coffee.
The most impactful exemptions include beef, coffee, rare earths, energy products, aircraft, and aircraft parts.
The American Chamber of Commerce for Brazil, a business group, reported the new tariff increased exemptions by 25%, covering some $11 billion in annual trade, $2 billion less than expected, though it places "Brazil among the countries facing the most restrictive conditions for access to the U.S. market."
The investigation into Brazil, opened last July, cited several alleged unfair practices, including illegal deforestation and Brazil's instant payment system, Pix, which the U.S. government argues disadvantages credit card companies.
Brazil vehemently rejected all the allegations.
Brazil has also been included in a separate Section 301 investigation by the USTR, due to conclude on July 24, into connections to forced labor in the supply chains of dozens of countries.
The probe is expected to result in an additional 12.5% tariff, bringing the total burden for Brazilian products to 37.5%.
(Additional reporting by Shivangi Acharya, Rocky Swift, Akanksha Khushi, Joao Manuel Mauricio and Lisandra Paraguassu; Writing by Raju Gopalakrishnan and Isabel Teles; Editing by Muralikumar Anantharaman, Christopher Cushing, William Mallard and Chizu Nomiyama)
