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Analysts warn about the impact of Trump tariffs on shares of Brazil's Embraer

The shares of Brazilian planemaker Embraer plunged sharply Thursday after U.S. president Donald Trump announced he would impose 50% tariffs on all imports coming from South America.

Analysts have warned that the third largest aircraft manufacturer in the world, with a large market for its executive jets and regional planes in the U.S., will be among the most affected firms by the tariffs.

Embraer shares traded in Sao Paulo fell as much as 8 percent on the news before reversing their losses and trading down only 5%. Embraer led the decline in Brazil's Bovespa index which fell 0.7%. SkyWest recently ordered 60 E175 Embraer jets. The demand for business jets has been high in Brazil, where Embraer has assembly lines.

Analysts at Itau BBA said that 60% of Embraer’s revenues are derived from North America. Of this, three quarters of them could be affected by tariffs. The analysts estimated that Embraer could lose $150 million in earnings before interest and tax (EBIT) between August and December.

Brazil's top imports to the United States are aircraft, oil, steel, coffee, and orange juice.

Analysts at XP said that "although we see Trump's statement primarily as a negotiation tool, we expect investors to remain concerned given the potential impact a 50% tariff on Brazilian products would have for Embraer."

They noted that although Embraer's jets are assembled in Florida, some of their content comes from Brazil. XP said that the tariffs may also affect demand for E1 aircraft in an inflationary climate. Embraer shares have risen more than 30% year-to date, after a 150% increase last year. The shares reached a new record earlier this month due to robust demand for Embraer's aircraft. (Reporting and editing by Paul Simao; Gabriel Araujo)

(source: Reuters)