Results of U.S. Section 301 Investigation into Brazil Lead to Proposed U.S. Tariffs, and Renewed Bilateral Tensions

On June 1, the Office of the U.S. Trade Representative (“USTR”) published a Federal Register notice announcing the results of its investigation under Section 301 of the Trade Act of 1974 (“Section 301”) into certain trade policies and practices by Brazil. Finding that country’s conduct to be actionable under Section 301, USTR proposed imposing a 25% tariff on many imports from Brazil. Public comments on these proposed tariffs will be accepted until July 1, and USTR will hold a hearing on the proposed measures on July 6.

As discussed in a previous client alert, USTR published a Federal Register notice in July 2025 formally initiating a Section 301 investigation against Brazil, as directed by President Trump. The notice identified the following issues relating to Brazil’s trade practices to be within the scope of the investigation:

1. Discriminatory practices affecting U.S. competitiveness in digital trade and electronic payment services;
2. The granting by Brazil of lower, preferential tariff rates to other countries, including under trade agreements with India and Mexico;
3. Weak anti-corruption enforcement and lack of transparency;
4. Denial of adequate and effective intellectual property protections;
5. Poor market access for U.S. ethanol exports, a long-standing bilateral trade irritant; and
6. Failure to adequately address illegal deforestation, leading to an alleged unfair competitive advantage for Brazilian agricultural producers.

In its June 1 notice, USTR determined that acts, policies, and practices in all six areas “are unreasonable or discriminatory and a burden or restrict U.S. commerce and thus are actionable.” USTR has proposed taking responsive action against Brazil in the form of a 25% tariff on any imports from Brazil that are not explicitly exempted. Proposed exemptions would cover over 1,600 product categories, many of which include some of Brazil’s top exports to the United States, such as petroleum, coffee, beef, orange juice, and civil aircraft products. Other products—including certain Brazilian metals exports and construction equipment—could be eligible for exemptions because they are separately subject to U.S. tariffs imposed on national security grounds under Section 232 of the Trade Expansion Act of 1962.

Shortly following USTR’s announcement, the Brazilian federal government issued a press release (in Portuguese) rejecting the basis for USTR’s determinations. Brazilian President Luiz Inácio Lula da Silva also called the tariffs unjustified and politically-motivated, and threatened possible retaliation should the tariffs come into effect.  

Prior to finalizing tariffs against Brazil, USTR has requested public comments on the proposed measure. Consistent with prior Trump Administration statements indicating USTR’s stated intent to conduct this and other Section 301 proceedings on an “accelerated timeframe,” the deadline for public comments is fast approaching. Hearing requests and summaries of testimony are due by June 22, while written comments are due by July 1. USTR will hold a public hearing on the proposed tariffs on July 6, but unlike in prior Section 301 proceedings, USTR has not indicated that it will accept post-hearing rebuttal comments. If you are interested in participating in this process, Covington can assist in the preparation and transmission of these comments.

USTR has specifically invited comments on:

• The scope of the proposed tariffs, including possible addition or removal of particular tariff subheadings subject to the proposed action;
• Whether the proposed tariffs (or suggested modifications thereto) will cause dislocations in product supplies or economic disruption; and
• Whether the proposed tariffs (or suggested modifications) will be practical or effective in obtaining the elimination of Brazil’s unfair trade policies and practices.

The announcement of USTR’s Section 301 determination occurs against the backdrop of broader bilateral developments, including the Department of State’s May 28 designation of the Brazilian criminal organizations Primeiro Comando da Capital (“PCC”) and Comando Vermelho (“CV”) as Specially Designated Global Terrorists (“SDGTs”) and Foreign Terrorist Organizations (“FTOs”).  In addition, on June 2, USTR also announced the results of separate Section 301 investigations against 60 economies—including Brazil—relating to import prohibitions on goods made with forced labor, proposing additional (and presumably cumulative) tariffs in that proceeding as well. These actions followed Brazil’s leading role in opposing the push by the United States and other countries during the World Trade Organization (“WTO”) 14^th Ministerial Conference in March for a multi-year extension of the WTO moratorium on customs duties for electronic transmissions.

These developments have contributed to renewed bilateral tensions despite ongoing U.S.-Brazil negotiations and productive meetings held by Presidents Trump and Lula in New York and Kuala Lumpur in 2025, and a bilateral summit held in Washington, DC on May 7, 2026.

These tensions were further exacerbated by the perceived role played by the sons of former Brazilian President Jair Bolsonaro in securing the PCC and CV designation.  Senator Flavio Bolsonaro—the main opposition candidate running against President Lula in the October Brazilian presidential election—and former Representative Eduardo Bolsonaro met with President Trump at the White House on May 26, two days prior to the Department of State designation. 

Beyond statements responding directly to USTR’s announcement, President Lula’s response to the recent U.S. actions has been largely focused on domestic political dynamics, as he seems to be trying to weaken Senator Flavio Bolsonaro’s electoral standing by portraying his actions as detrimental to Brazil’s interests.  President Lula has also openly criticized U.S. Secretary of State Marco Rubio, while avoiding any confrontation with President Trump.  He has also largely focused his response on USTR’s determination against Brazil’s Central Bank free instant payment system—known as “Pix”—, a popular public policy.

In addition, on June 16, Brazil’s Supreme Court sentenced former Representative Eduardo Bolsonaro to four years and two months in prison. The justices stated he acted with members of the U.S. government to coerce the Supreme Court by seeking U.S. economic measures against Brazil and sanctions against Court members.

Companies affected by these trade developments may consider submitting comments by July 1 in response to USTR’s proposed tariffs, and may also benefit from exploring tariff mitigation strategies for the short and long term, including assessing the commercial impact of the tariffs, evaluating alternative suppliers, and considering options to shift merchandise to other markets. Outreach to government officials and/or participation in public consultation processes implemented under U.S. law may also be beneficial.

Companies operating in Brazilian sectors with exposure to PCC and CV activity may also benefit from a thorough review of their compliance strategy, policies, and processes.

Covington’s diverse team of trade, policy, compliance, and investigation experts—which includes former U.S. and Brazilian government officials and business specialists, and Portuguese speakers—is uniquely positioned to provide thoughtful strategic advice to clients on these issues and related developments. If you have any questions concerning the materials discussed in this update, please contact the members of our team.