Brazil's Lula vows to reciprocate potential Trump tariffs, makes market-friendly remarks

By Lisandra Paraguassu, Gabriel Araujo

BRASILIA (Reuters) -Brazilian President Luiz Inacio Lula da Silva said on Thursday that his government would reciprocate if U.S. President Donald Trump decides to impose tariffs on Latin America's largest economy, and called for mutual respect.

"It is very simple: if he taxes Brazilian products, there will be reciprocity," Lula told a press conference in Brasilia.

The United States runs a trade surplus with Brazil, which according to Brazil's government hit $253 million last year. But Trump this week named the country among those he believes meant the U.S. "harm," threatening potential tariffs.

"China is a tremendous tariff maker, and India, Brazil, so many countries," Trump said in a speech on Monday. "So we're not going to let that happen any longer, because we're going to put America first." 

The U.S. is a large buyer of Brazilian oil, steel products, coffee, aircraft and orange juice, while the South American country buys energy products, pharmaceutical goods and aircraft parts from the U.S., among other products.

A Brazilian official had previously said the country hoped its trade deficit with the U.S. would help it avoid tariffs pledged by Trump on many nations. Brazil has not run a trade surplus with the U.S. since 2008.

"I have governed Brazil while the U.S. had Republican and Democratic presidents, and our relationship has always been between two sovereign countries," said Lula, who in 2023 took office for his third non-consecutive term.

"Trump was elected to run the U.S. and I was elected to run Brazil. I will respect the U.S. and want Trump to respect Brazil. That's all," Lula said.

Leftist Lula had friendly relations with Trump's Democratic predecessor, Joe Biden, while Trump is closer to Brazil's former far-right President Jair Bolsonaro, who has been called "Trump of the tropics."

MARKET-FRIENDLY REMARKS

Lula at the press conference voiced support for government non-interference in monetary policy and the pricing strategy of state-run oil giant Petrobras, in market-friendly remarks that followed a drop in his approval ratings.

He also said that if additional fiscal measures are needed during the year, "we will consider them," amid growing market concerns over Brazil's rising public debt.

Lula said central bank chief Gabriel Galipolo "did what he thought was necessary" after policymakers raised the key interest rate by 100 basis points to 13.25% on Wednesday.

Lula said Galipolo, who took office earlier this month, would set the conditions for lowering interest rates "at the appropriate time" and would have full autonomy in his role.

Amid reports that Petrobras was considering a diesel price hike, Lula emphasized that the decision rests with the company, "not the president."

"Petrobras does not need to tell me (about fuel price tweaks). If Petrobras decides that it is important to make an adjustment, then they can do it," he said.

A Genial/Quaest poll released this week showed Lula's approval ratings slipping, with disapproval surpassing approval for the first time in two years, driven by rising food prices, concerns over increased taxation, and market volatility.

When asked about measures to ease food-related inflation, Lula ruled out steps that could lead to the creation of a black market. "What we can do is increase production of everything we can produce," he said.

The Brazilian real pared some earlier losses after Lula's remarks, trading down about 0.4% against the U.S. dollar, while the benchmark Bovespa stock index extended gains, rising 1.8%.

(Reporting by Lisandra Paraguassu and Marcela Ayres in Brasilia, and Gabriel Araujo in Sao Paulo; Editing by Paul Simao and Matthew Lewis)