USTR Announces Launch of Section 301 Investigation into Unfair Trade Practices
Pressure Mounts on Brazil Following Trump's Proposal of 50% Tariff
The United States Trade Representative (USTR) announced on July 15 (local time) that it has launched an investigation into Brazil for unfair trade practices under Section 301 of the Trade Act. This comes just six days after President Donald Trump urged an investigation into Brazil and proposed a 50% reciprocal tariff rate on the country.
On its website, the USTR stated, "We have initiated an investigation into Brazil based on Section 301 of the Trade Act," and listed six unfair trade practices that prompted the investigation. These include: ▲digital trade and electronic payment services ▲unfair and discriminatory tariffs ▲obstacles to anti-corruption and transparency ▲insufficient protection of intellectual property rights ▲restrictions on access to the ethanol market ▲inadequate enforcement against illegal deforestation, among others.
Jaymeon Greer, United States Trade Representative, stated, "In accordance with President Trump's directive, we are investigating Brazil's attacks on American social media companies, as well as other unfair trade practices that harm American workers and farmers." He added, "After consultations with other government agencies, advisory bodies, and Congress, we have determined that thorough review and potential responsive measures are necessary."
The core of Section 301 of the Trade Act is that, if it is determined there are no remedies for discriminatory practices by a foreign government, the United States may impose tariffs or import restrictions. It is regarded as a symbol of protectionism and serves as a legal basis for the United States to broadly sanction trading partners. Previously, the United States launched a Section 301 investigation into the Chinese shipbuilding industry following petitions from the shipbuilding and steel industries.
President Trump revealed on July 9 that he had sent a letter to President Luiz Inacio Lula da Silva specifying a 50% tariff rate. This means imposing a 50% tariff, which is 40 percentage points higher than the basic tariff (10%) that had been applied to Brazil since April. He also stated that he would order Representative Greer to immediately begin an investigation into Brazil under Section 301 of the Trade Act.
President Trump cited political reasons for imposing the high reciprocal tariff rate. In his letter to President Lula, he described the ongoing trial of former President Jair Bolsonaro as "an international disgrace," stating, "This trial must not proceed. The witch hunt must end immediately." Former President Bolsonaro is known to regard President Trump as a "political role model."
In contrast, Brazil is responding firmly, hinting at "retaliatory tariffs" under its Economic Reciprocity Law. On the previous day, President Lula secured a legal basis to impose an equivalent tariff rate in response, by signing a presidential decree to that effect, should the United States actually impose the 50% tariff. Vice President and Minister of Industry and Trade Geraldo Alckmin also declared, "The government does not plan to ask the United States to delay the start date of the tariffs," and emphasized, "We will resolve the issue by the 31st."
Meanwhile, the USTR stated, "We have requested consultations with Brazil regarding this investigation," and added, "After exchanging written statements, requests to attend the public hearing, and summaries of testimony, a public hearing is scheduled to be held on September 3."
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