An 80-minute phone call between Presidents Lula and Trump revives stalled negotiations over the 25 percent Section 301 tariff and the 12.5 percent forced-labor duty squeezing Brazilian exports to the United States
WASHINGTON, Aug. 23, 2026
The United States and Brazil agreed on Friday to restart negotiations over the tariffs Washington imposed on Brazilian goods last month, after an 80-minute telephone call between President Donald Trump and President Luiz Inacio Lula da Silva that both governments described in unusually warm terms, even as Lula bluntly told his American counterpart that the legal grounds for the duties were “unfounded.”
According to the readout issued by Brazil’s presidential office and reported by Agencia Brasil and UPI, the August 21 conversation ended with an agreement that technical delegations from both governments will resume meetings aimed at resolving the dispute, with Trump proposing that officials get together “as soon as possible.” Reuters, citing the Brazilian government, reported that Trump was receptive to preserving what Brasilia called strategic trade ties.
The call is the most significant thaw in United States-Brazil economic relations since mid-July, when the Office of the United States Trade Representative announced a 25 percent tariff on a range of Brazilian goods under Section 301 of the Trade Act of 1974, citing what it characterized as unfair trade practices. That duty took effect on July 22 and came on top of a separate 12.5 percent tariff applied to Brazilian goods on July 24 as part of a sweeping forced-labor enforcement action covering some 60 economies. For many Brazilian export lines, the two measures stack, producing an effective new burden of 37.5 percentage points on top of pre-existing rates.
For Lula, who faces a presidential election in October, the call was a calculated de-escalation. For Trump, it was the second conciliatory gesture toward a major trading partner in a single day, coming hours after he announced tariff relief on ground beef imports and as his negotiators worked, ultimately unsuccessfully, to close a deal with Canada. For businesses on both sides of the hemisphere’s largest bilateral trade relationship outside North America, it was the first concrete signal in weeks that the tariff wall may be negotiable.
BACKGROUND: HOW THE HEMISPHERE’S TWO GIANTS GOT HERE
The current dispute is the second act of a confrontation that began in July 2025, when Trump announced tariffs of 50 percent on Brazilian goods while publicly linking the measure to the criminal trial of former president Jair Bolsonaro, which he called a witch hunt. That episode poisoned relations for months. Lula used a United Nations appearance in October 2025 to demand the duties be lifted, and a slow diplomatic repair effort followed.
This year’s action rests on different and more conventional legal footing. The Section 301 determination announced on July 15 accused Brazil of a series of practices that the United States said burden American commerce. According to UPI’s account of the underlying measures, the cited concerns include Brazil’s Pix instant payment system, which American payment firms argue advantages a state-run network over private competitors; Brazil’s treatment of the ethanol trade, a long-running irritant for American corn-based ethanol producers; aspects of Brazil’s anti-corruption enforcement; and its record on curbing deforestation. The separate 12.5 percent duty flows from the forced-labor Section 301 action that USTR applied to dozens of countries in late July, based on findings that each failed to impose or effectively enforce a prohibition on imports made with forced labor.
Brazil has not absorbed the blows passively. On August 14, the government in Brasilia formally launched a reciprocity process, a domestic legal mechanism that could authorize countermeasures against American goods, while stopping short of actually imposing them. The economic pressure to find an exit is real: UPI reported on August 11 that Brazilian exports to the United States have fallen to a three-year low as the tariffs bite into shipments of goods from steel and aircraft parts to coffee, beef and orange juice.
Against that backdrop, Friday’s call was arranged at Brazilian initiative, according to Bloomberg, which reported that Lula sought to soothe relations with Washington ahead of the October election. The two leaders had met briefly and spoken by phone before, but the August 21 conversation was their longest and most substantive engagement of the year.
WHAT WAS SAID: ‘FRIENDLY AND CORDIAL,’ WITH AN EDGE
The Brazilian readout describes a “friendly and cordial” exchange, language Brasilia chose deliberately after a year in which the relationship has swung between insult and embrace. But the substance carried an edge. Lula, according to the readout reported by UPI and AFP, rejected the American justifications for the tariffs outright, calling them “unfounded” and arguing that the measures lack a factual basis while causing direct economic harm to both countries. He told Trump the duties “negatively affect both Brazil and the United States,” according to Reuters, and pressed the point that negotiation, not escalation, is the appropriate path.
Trump, for his part, did not relitigate the merits on the call, according to the Brazilian account. He agreed that technical delegations should meet as soon as possible and signaled interest in keeping strategic commercial ties intact. The White House did not immediately release its own detailed readout, leaving the Brazilian version to define the public record, a pattern familiar from earlier rounds of this dispute.
Notably, the conversation ranged well beyond trade. Lula raised cooperation against organized crime, describing his government’s strategy of financially strangling criminal groups through asset seizures and the construction of maximum-security prisons, while cautioning that Brazilian criminal factions should not be legally conflated with terrorist organizations, a designation debate with direct consequences for American policy toward Latin America. Trump, according to the readout, expressed willingness to deepen cooperation on border security and high-level intelligence sharing. The two presidents closed by discussing negotiated approaches to the wars in Ukraine and the Middle East.
The breadth of the agenda is itself diplomatic information. By embedding the tariff dispute inside a wider conversation about security cooperation and geopolitics, both leaders gave themselves room to treat trade as one negotiable strand of a relationship neither can afford to rupture.
STAKEHOLDER REACTIONS: EXPORTERS HOPEFUL, HAWKS WARY
In Brazil, the call was received as vindication of Lula’s two-track strategy of preparing retaliation while courting dialogue. Officials in the economy ministry have privately argued for weeks that the reciprocity process was leverage, not destiny. Industry associations representing coffee, beef, footwear and aerospace exporters, sectors with heavy exposure to the American market, have pressed the government to prioritize a negotiated settlement over countermeasures that would raise costs for Brazilian importers of American machinery and fuels.
Lula himself framed the outcome as a victory for diplomacy, reiterating, in the government’s words, that negotiations are the best way to resolve the dispute and that bilateral dialogue must remain open. His allies noted the political convenience: standing up to Washington without provoking it plays well across the Brazilian electorate six weeks before voters go to the polls.
On the American side, reaction split along familiar lines. Trade hawks aligned with the administration view the Brazil tariffs as leverage that is working precisely as designed, pointing to the fact that it was Lula who picked up the phone. Business constituencies see mounting costs. American importers of Brazilian coffee and orange juice have watched landed costs jump since July, feeding into grocery inflation that the administration is simultaneously trying to fight with actions like Friday’s beef announcement. American payment and technology firms, whose complaints about Pix helped trigger the Section 301 case, want the leverage maintained until Brazil makes structural concessions. Agricultural exporters, meanwhile, fear being the designated target if Brazil’s reciprocity process ever ripens into actual retaliation.
Trade lawyers note that the two tariff layers present different negotiating problems. The 25 percent unfair-practices tariff is bespoke to Brazil and can be dialed down bilaterally if USTR certifies progress on the cited practices. The 12.5 percent forced-labor duty is part of a 60-economy architecture, and carving Brazil out would invite every other affected country to demand the same treatment, which is why observers expect any near-term relief to come on the larger, Brazil-specific layer first.
ECONOMIC IMPACT: A RELATIONSHIP UNDER MEASURABLE STRAIN
The numbers tell the story of a relationship under strain. Brazilian exports to the United States at a three-year low represent billions of dollars in redirected or foregone trade. Brazil has accelerated its pivot toward China, its largest trading partner, integrating its Pix payment network with China’s UnionPay in early August, a move that Washington’s strategic community read as a pointed signal that Brazil has alternatives.
For the United States, the costs are subtler but real. Brazil is a critical supplier in categories where domestic substitution is slow or impossible: coffee, of which Brazil is the world’s largest producer; orange juice concentrate; certain grades of beef for grinding; pig iron used by American steelmakers; and regional aircraft from Embraer that American carriers fly. Tariffs of 25 to 37.5 percent on such inputs function substantially as a tax on American buyers. Coffee futures and juice concentrate prices have both reflected the disruption since July, and food manufacturers have warned of pass-through to retail prices into the autumn.
The macroeconomic stakes for Brazil are electorally charged. The tariff shock arrives as Lula seeks a second consecutive term, and the export decline is concentrated in politically sensitive industrial and agricultural regions. A negotiated de-escalation before October would allow the government to claim both firmness and results. Failure would strengthen arguments on the Brazilian right that Lula’s frosty personal history with Trump is an economic liability, although Bolsonaro’s own legal saga complicates that critique.
For global markets, the episode is a test of whether the post-IEEPA tariff architecture is negotiable at all. Since the Supreme Court struck down the emergency-powers tariffs in February, the administration has rebuilt its trade wall on Section 301, Section 232 and safeguard authorities. Those instruments are legally sturdier but procedurally heavier, and each negotiated rollback creates precedent. Brazil is the first major economy to reach the table on a bespoke Section 301 action this cycle; how the talks unfold will inform strategies in New Delhi, Brussels and beyond.
IMPLICATIONS FOR IMPORTERS, EXPORTERS AND US BUSINESSES
For American importers of Brazilian goods, Friday’s call changes probabilities, not tariff schedules. The 25 percent and 12.5 percent duties remain in force, and no timetable for the technical talks has been published. Compliance teams should continue to enter goods at current rates while tracking three signposts: the announcement of a first delegation meeting and its agenda; any Federal Register activity signaling modification of the Brazil-specific Section 301 action; and the trajectory of Brazil’s reciprocity process, which the government can accelerate if talks stall.
Importers with flexible sourcing face a genuine timing decision. Shifting coffee, beef or juice sourcing to third countries locks in certainty but forfeits upside if the talks produce relief within months. Contracts with tariff-adjustment clauses, an increasingly standard feature since 2025, are the practical hedge. Importers should also monitor the forced-labor layer separately: compliance documentation demonstrating clean supply chains may matter if USTR builds an exclusion or certification pathway into that program, as trade bar commentary has speculated it eventually must.
American exporters to Brazil should treat the reciprocity process as live risk. Brazilian countermeasures, if triggered, would most plausibly target goods with political resonance and available substitutes, and American ethanol, machinery, chemicals and consumer goods have all featured in Brazilian scenario planning according to local press. Exporters should quantify exposure now rather than after a retaliation list appears.
For multinationals operating in both markets, the wider lesson of Friday’s call is that this dispute is being managed at the leaders’ level, where linkage is the currency. Security cooperation, payment-system regulation, environmental policy and geopolitics are all on the same table as tariffs. That raises the ceiling on possible bargains and lowers the predictability of any single outcome. The prudent posture is the one Brazilian negotiators themselves have adopted: prepare for the worst case, negotiate for the best one, and assume the distance between them can be covered in a single phone call.
THE PIX PROBLEM AND THE SHAPE OF A POSSIBLE DEAL
If the technical delegations do convene in the coming weeks, the hardest file on the table will not be a traditional trade issue at all. It will be Pix, the instant payment system operated by Brazil’s central bank, which has become the default way tens of millions of Brazilians transfer money and pay merchants. American card networks and payment processors argue that a free, state-operated network structurally forecloses the market to private competitors, and their complaints supplied a central pillar of the Section 301 case. Brazil regards Pix as sovereign financial infrastructure and a signature public-policy success, and no Brazilian government, least of all one facing an election, can plausibly dismantle or handicap it at Washington’s request.
That asymmetry defines the negotiating problem. The other cited practices offer more conventional bargaining space. Ethanol is a tariff-and-quota negotiation of a familiar kind, and Brazil has traded access in that sector before. Deforestation and anti-corruption enforcement are areas where Brazil can offer process commitments, monitoring and enforcement benchmarks that allow USTR to certify progress without Brazil surrendering policy control. Trade practitioners who have handled Section 301 negotiations note that these actions typically end not with capitulation but with a memorandum of understanding: a list of measurable commitments, a suspension of some or all of the duties contingent on compliance, and a snap-back clause if commitments lapse. A realistic near-term landing zone, several told trade press this month, would suspend the 25 percent Brazil-specific tariff in stages while leaving the forced-labor duty to be addressed through that program’s own eventual certification machinery.
The Pix integration with China’s UnionPay, completed in early August, complicates and clarifies the picture at once. It signals to Washington that pressuring Brazil’s payment system pushes Brasilia toward Beijing, exactly the strategic outcome American policy in Latin America is meant to prevent. Some analysts in Washington’s strategic community have begun arguing that the payments dispute belongs in a financial-regulatory dialogue rather than a tariff action for precisely that reason.
A CALENDAR CROWDED WITH DEADLINES
The negotiation, if it begins, will run against a crowded calendar. Brazil’s presidential election on the first Sunday of October imposes a hard political constraint: Lula cannot make visible concessions in September, and Washington knows any deal signed before the vote would be attacked in Brazil as electoral interference or surrender, depending on the critic. That points either to a rapid framework announcement that is heavy on process and light on substance, or to serious bargaining deferred until the election result is known.
On the American side, the midterm calendar cuts the other way. The administration is actively hunting for wins on consumer prices, as Friday’s parallel announcement on ground beef tariffs demonstrated, and Brazilian coffee, beef and orange juice map directly onto the grocery-price problem. That gives Washington its own quiet incentive to find early relief on food-adjacent tariff lines, even ahead of a comprehensive settlement. Trade watchers will also mark the 30-day response clocks that WTO procedures impose on pending consultation requests involving the two countries, and the possibility that Brazil’s reciprocity process reaches a decision point if talks show no movement by late September.
None of this is lost on markets. Brazilian export associations began circulating scenario analyses within hours of the call, and the real firmed modestly against the dollar on Friday afternoon as headlines crossed. The moves were small, appropriately, because a phone call is not a term sheet. But after six weeks in which the relationship produced only escalation, direction matters.
History offers a cautionary footnote. The 2025 round of this dispute also featured moments of apparent breakthrough, including a cordial leaders’ exchange at the United Nations in October of that year, which were followed by months of drift before duties actually moved. Brazilian diplomats acknowledge privately that a readout is not a concession, and that the substance of Friday’s call, stripped of atmosphere, amounts to an agreement to talk about talking. What has changed since 2025, they argue, is the surrounding pressure: Brazilian exports to America are measurably falling, American consumer prices for Brazilian-supplied staples are measurably rising, both presidents face elections within 75 days of each other, and the administration’s tariff program as a whole is under fiscal and legal strain following the Supreme Court’s ruling on the emergency-powers tariffs in February. Disputes tend to settle when both sides are paying for them. By that standard, the conditions for a deal are better now than at any point since the first tariffs landed.
Both governments say the delegations will meet soon. Neither has said what success looks like. In a year when American tariff policy has changed by one count more than 50 times, the only safe prediction is that the next move will arrive quickly, and quite possibly on social media first.
For the businesses caught in between, the August 21 call is best understood as the opening of a window rather than the end of a dispute. Windows in this trade cycle have tended to close as abruptly as they open. The companies that fare best over the coming quarter will be those that treat the diplomacy as weather, useful to forecast, impossible to control, and no substitute for carrying an umbrella.