Goldman Sachs predicts the U.S. will set an effective tariff rate of 30.8% on Brazilian imports, including exemptions. This figure also considers possible extra sector-specific tariffs. They warn that Brazil might retaliate with tariffs, impacting both its economy and inflation. These potential tariffs, along with possible responses, signal complex trade dynamics between the U.S. and Brazil.

Impact on Currency Markets

The new 30.8% tariff on Brazilian imports is likely to disrupt the market significantly. We expect the most immediate effects on currency markets. Derivative traders should look for strategies that capitalize on a weaker Brazilian Real against the U.S. dollar, anticipating that capital will likely leave Brazil. This month, the Brazilian Real has declined from 5.35 to 5.52 against the dollar due to rising trade tensions. In the past, during the U.S.-China trade dispute, smaller economies saw their currencies take a hit. We think this will happen again, making put options on the Real or long positions in USD/BRL futures wise choices. Additionally, Brazilian stocks will likely suffer, especially the iShares MSCI Brazil ETF (EWZ). In July 2025, EWZ has already dropped nearly 9% as investors factor in these risks. Buying put options on EWZ could be a smart move in anticipation of further declines as corporate profits are squeezed by new trade barriers.

Opportunities and Risks

Brazil’s possible retaliation creates chances for some U.S. sectors. The country imports a lot of U.S. ethanol and machinery, making these likely targets for counter-tariffs. We should keep an eye on large U.S. industrial and agricultural companies with high sales to Brazil for signs of weakness. As the largest exporter of soybeans and coffee, any disruptions in Brazil will lead to significant price fluctuations in commodity markets. In 2024, the U.S. remained a top destination for Brazilian coffee. Traders might want to consider options on coffee futures to benefit from the expected price volatility in the coming weeks. With overall market uncertainty climbing, there’s a shift towards products linked to volatility. The CBOE Volatility Index (VIX) increased from 16 to 19.5 last month. We recommend purchasing VIX call options as a safeguard against broader market shocks that would come with a formal tariff announcement. Create your live VT Markets account and start trading now.

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