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The Daily Reckoning

Brazil launches salvo of trade sanctions against US

Brazil is launching sanctions against the US in retaliation for government subsides for US cotton producers.

By Rocky VegaGuest blogger / March 11, 2010

Brazil is launching tariffs on US products, including cars, in retaliation for government subsides for US cotton producers.

REUTERS/Jeff Kowalsky/Files

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According to the head of economic affairs at Brazil’s foreign ministry, Carlos Marcio Cozendey, the plan is “to distribute the retaliation broadly in order to maximise pressure.”

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The “retaliation” he refers to includes trade sections on 100 US goods, ranging from cars to milk powder. The tariffs are in response to cotton producer subsidies the US has kept in place despite a 2008 WTO ruling that found the practice discriminatory.

From the BBC News:

“The World Trade Organization (WTO) approved the sanctions in a rare move.

“Brazil published a list of 100 US goods that would be subject to import tariffs in 30 days, unless the two governments reached a last-minute accord.

“It said it regretted the sanctions, but that eight years of litigation had failed to produce a result.

“It said it would raise tariffs on $591m (£393m) worth of US products – from cars, where the tariff will increase from 35% to 50%, to milk powder, which would see a 20% increase in the levy.

“Cotton and cotton products would be charged 100% import tariff, the highest on the list.”

As a rising economic force Brazil is taking a strong stance on the issue. It’s not insignificant to begin a trade confrontation the largest economy in the world. We’ll watch closely to see how this aggressiveness plays out.

Read more of the history behind the subsidies and about what the response means in the BBC’s coverage of Brazil’s US trade sanctions.

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