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Trump imposes tariffs on Brazil of 50%, but excludes aircraft, OJ and energy
Donald Trump, the U.S. president, imposed a 50% tariff Wednesday on Brazilian goods in response to what he called a witch hunt against former President Jairbolsonaro. However, he softened his blow by exempting sectors like aircraft, energy, and orange juice from higher levies. This came as a welcome relief to many in Brasilia who, since Trump announced his tariff earlier in the month, had been calling for protections for major Brazilian exporters caught up in the crossfire. The shares of Embraer, a plane manufacturer, and Suzano, a pulp maker rose. The Brazilian Treasury Secretary Rogerio Ceron said to reporters that "we're not in the worst case scenario." It's a better outcome than could have been. The new tariffs are set to go into effect August 6, and not August 1, as Trump originally announced. The White House linked the tariffs in a Wednesday factsheet on Trump's executive orders to Brazil's prosecution against Trump ally Bolsonaro. Bolsonaro is currently on trial for allegedly plotting to overturn the 2022 election loss. The U.S. announced sanctions against a Brazilian Supreme Court judge overseeing Bolsonaro’s trial. They accused the judge of authorizing pre-trial detentions that were arbitrary and of suppressing freedoms of expression. Trump's executive orders formalizing a tariff of 50% excluded dozens key Brazilian exports into the United States. These included civil aircraft, pig-iron, precious metals and wood pulp as well as energy and fertilizers. Embraer stated that an initial review indicated a 10% tariff, imposed by Trump back in April, remains in effect. The exclusion applies to the additional 40 percent. Rafael Favetti is a partner in the political consultancy Fatto Inteligencia Politica, located in Brasilia. He believes that these exceptions may be a response to U.S. company concerns, and not a retreat from Trump's attempts to influence Brazilian politics. He said that "this also shows Brazilian diplomacy has done its job correctly in raising awareness among U.S. businesses." Mauro Vieira, Brazilian Minister of External Affairs, said he had met with U.S. Sec. of State Marco Rubio to reaffirm his country's willingness for negotiations on tariffs. This is a sign of a possible restart of the negotiations which stalled back in June. Vieira said that Bolsonaro’s legal problems cannot be considered in negotiations. The State Department didn't immediately respond to a comment request. A SMALLER EFFECT Welber Baral, former Brazilian Trade Secretary, estimated that Brazil exports around 3,000 different types of products to the United States. Barral stated that "there will be an effect." According to an analysis by the American Chamber of Commerce for Brazil, almost 700 products are exempt from the new tariffs. This represents 43.4% of Brazil’s total exports by value. Embraer, which exports 70% of its executive aircraft to the United States, and 45% of commercial aircraft, was a major concern for Bolsonaro’s leftist opponent, President Luiz inacio da Silva. Analysts also warned that Suzano could suffer a severe impact, as it is one of the largest wood pulp producers in the world. In Sao Paulo, Embraer's shares rose by 11% and Suzano's gained more than 1% during afternoon trading. IBP, a lobbying group for oil, said that after oil products are listed as exempted from the new tariffs, oil shipments will resume to the U.S. Ibram, the mining lobby, stated that exemptions covered 75% of all mining exports. The executive order of Wednesday did not include any exemptions for coffee or beef, two important exports to the United States. Roberto Perosa is the head of Brazilian meatpacking group Abiec. The group represents producers of beef, including JBS, Marfrig and Marfrig. Cecafe, a group of Brazilian coffee exporters, said in a press release that it would continue to work for coffee being included as an exemption. The battle over tariffs will continue as the political motivations behind them provide ammunition to the plaintiffs who have filed a lawsuit. Alex Jacquez who worked at the White House National Economic Council for former President Joe Biden said that the new tariffs are a violation of "both the law and Trump’s stated trade policy." He said that the tariffs would only increase coffee prices. "We have a large trade surplus with Brazil. These punitive duties will not rebalance unfair trade. Reporting by Luciana Magialhaes and Gabriel Araujo in Sao Paulo; Lisandra Paraguassu, Marcela Ayres and Ismail Shakil, in Brasilia; Kanishka Singh, in Washington; Manuela Andreoni, in Ottawa; Brad Haynes, Rosalba o'Brien, in Washington.
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FirstEnergy exceeds Q2 profit expectations on higher electricity prices
FirstEnergy, a utility that benefits from higher rates, beat Wall Street's expectations for the second quarter adjusted profit on Tuesday. U.S. utilities are trying to increase power bills in order to upgrade their infrastructure. This is because the electrical grids of the United States are under increasing pressure due to increased demand from industries and data centres. FirstEnergy, for example, uses rate cases to determine customer charges by comparing the investments they made in their transmission and electric systems. The company's quarterly performance was boosted as a result of the new Pennsylvania base rates, even though milder temperatures impacted demand for electricity. The company stated that milder temperatures reduced customer demand during the third quarter by almost 3% compared to a year ago. FirstEnergy provides electricity to about 6,000,000 customers in Ohio and Pennsylvania, New Jersey and West Virginia as well as Maryland and New York. It operates three segments: distribution, integrated transmission and stand-alone. According to data compiled and analyzed by LSEG, the Akron, Ohio, based company posted an adjusted profit per share of 52 cents in the second quarter. This was compared to analysts' estimates of 49 cents. Reporting by Khusbu Jennifer; Editing and proofreading by Anil D’Silva
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Ford shares fall 4% following the bell as it raises its projected tariff impact.
Ford Motors said that U.S. Tariffs on Imported Vehicles, as well As Materials Like Steel and Aluminum, Will Cost More Than Expected For The Year. Ford's Shares Slid About 4% In After-Market Trading. Ford said that its second-quarter earnings were hit by tariffs to the tune of $800 million. This was a smaller impact than other U.S. competitors due to Ford's strong manufacturing base in the United States. Ford increased the upper range of its projected impact on gross revenues due to tariffs for the entire year by $500 million to $3 billion. Sherry house, Ford's Chief Financial Officer, said that Ford increased the projection because tariffs on Mexico and Canada remained higher than expected for a longer period of time. She also cited increased levies on steel and aluminum. Dearborn, Michigan, automaker issued guidance on annual results Wednesday after suspending them in May for a month to assess the impact U.S. president Trump's tariffs. Ford has announced that it will now record full-year adjusted profits before interest and tax of $6.5 billion to $7 billion, down from the February 2025 projections of between $7.0 and $8.5 billion. The auto giant beat LSEG's expectation of 33 cents for the last quarter. Ford reported a $36 million net loss in the third quarter, primarily because of special charges related cancellation of a three row electric SUV and field service action from a $570,000,000 recall. Ford reported revenue of $50.2billion for the third quarter, an increase of 5% over the same period last year. Ford has gained market share by aggressively discounting its vehicles and offering a "zero zero zero" campaign that offers customers a $0 deposit, zero percent for 48 months and no payments for the initial 90 days. The CFRA Research analyst Garrett Nelson wrote in a report that "the substantial revenue outperformance shows Ford's pricing strength, but the margin compression indicates underlying cost pressures are still problematic." These deals led to a 15.5% rise in gasoline-powered cars during the quarter. In the third quarter, shoppers were also interested in hybrid offers. Ford reported that its results for the June quarter were $800m lower due to Washington's tariffs. General Motors' competitor reported a more severe tariff impact, with a $1.1billion hit to its quarter results, mostly from the imports of its entry-level Chevrolets and Buicks made in South Korea. GM estimates a tariff impact of $4 to $5 billion for the entire year. It plans to offset 30 percent of this expense. Ford said that it plans to offset $1 billion in gross tariff costs. Stellantis, a Jeep manufacturer, said that tariffs are expected to increase expenses by $1.7 billion for the entire year. The White House didn't respond to an email asking for comment on automakers' projected sales. Trump has in the past said that the levies would bring manufacturing and jobs to the U.S. Ford produces around 80% domestically of the cars it sells in America, which is about 25% more than the two Detroit rivals. This was revealed by a review of imports conducted by business analytics firm GlobalData. This foundation may have made the company more resistant to tariffs but it is still facing steep levies for aluminum, steel, and copper, which has rocked industry. Executives have also said that the shortage of rare earth magnets in China has caused production to be disrupted this quarter. Ford's EV investment and quality problems remained its biggest challenges. Ford had said earlier in the year that it anticipated a loss of up to $5.5billion on its EV business and software by 2025, before tariffs were imposed. The segment recorded an operating loss of $1.3 billion for the third quarter. The elimination of the $7,500 tax credit for consumers in September will likely further dampen sales growth. Automaker also faces costly quality problems and a record number of recalls. Jim Farley, Ford CEO since 2020, has made reducing these problems a top priority. (Reporting from Nora Eckert and Nathan Gomes in Bengaluru, Editing by David Gregorio.)
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Albemarle posts surprise second-quarter profit on lithium demand; shares surge
Albemarle is the largest lithium producer in the world. Its shares rose over 7% on Wednesday after the bell, thanks to the sustained demand for this metal. Fastmarkets, a consultancy, says that lithium's use for electric vehicles, large battery storage, and other electronic uses has increased rapidly. Demand was up by 24% in the past year, and is expected to increase by 12% per annum over the next decade. Albemarle reported that its April-June net sales were $1.33 billion. This is 7% less than the previous year, but still higher than analysts' expectations, which was $1.22 billion. Data compiled by LSEG. The company reported that its revenue decreased year-over-year due to lower prices, but was offset by growth in volume within its energy storage and specialty business segments. The price of lithium has fallen by more than 90 percent in the last two years, largely due to an oversupply from China. This is causing layoffs and corporate purchases, as well as project delays, around the world. Albemarle, to combat the price glut, has implemented measures like job cuts and cancellation of expansion projects. This includes a U.S. key lithium refinery. Albemarle began a "comprehensive" review of its costs and operating structure earlier this year. It is expected to complete the project by October. The lithium producer lowered Wednesday its capital expenditure plans for 2025 from $700 to $800 to $650 to $750. The company expects a positive cash flow for the entire year. The Charlotte-based company, which is headquartered in North Carolina, reported a quarterly adjusted profit per share of 11 cents, while analysts expected a loss per share of 82 cents. (Reporting from Vallari Srivastava, Bengaluru. Additional reporting by Ernest Scheyder, Houston. Editing by Alan Barona.)
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Lobby group says that oil shipments to the US from Brazil will resume following tariff exemption
The head of the Brazilian oil lobby IBP said on Wednesday that energy companies in Brazil will resume oil exports to the United States following the exemption from U.S. duties for several oil products. The top Brazilian export to the U.S. is oil. It was exempted from the 10% tariff on Brazilian exports in April, but the uncertainty about whether it would be exempted under the new tariffs announced on the 9th of July led to a stoppage in shipments throughout the month. Despite the fact that President Donald Trump's Wednesday decree increased tariffs on Brazil by 50%, several Brazilian exports were excluded from this measure, including orange juice, aircraft, pulp, and energy products. Roberto Ardenghy said, "We're out of the tariff." IBP represents oil and gas companies in Brazil, including Petrobras Shell TotalEnergies ExxonMobil Equinor. Ardenghy stated that due to uncertainty about tariffs in the past, companies stored oil on production vessels floating or cargo ships instead of shipping it to the United States. Oil shipments stopped when it became impossible for them to reach their destinations before August 1. According to data collected by StoneX, the consultancy group, Brazil will export 1.78 million barrels of oil per day in 2024. Of this, 243,000 barrels of oil per day will be exported to the United States. Ardenghy stated that if no oil exemption had been granted, Brazil would likely have diverted shipments towards Europe and India. Magda Chambriard is the CEO of Petrobras - Brazil's state oil company. She said that there would be no major impact on the company and it could divert flows to other areas. Ardenghy said, "Putting tariffs on our product is a lose-lose situation." (Reporting and writing by Marta Nogueira, Editing by Leslie Adler & Rosalba o'Brien; Fabio Teixeira)
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Trump claims that the US and Pakistan have reached a trade agreement
Donald Trump, the U.S. president, said that his administration had struck a deal on Wednesday with Pakistan under which Washington would work with Islamabad to develop South Asia's oil resources. Trump posted on Twitter: "We just concluded a Deal with the Country of Pakistan whereby Pakistan will work with the United States to develop their massive Oil Reserves." We are currently in the process to choose the Oil Company who will lead this Partnership. Trump's post on social media did not give any further details about the deal between Pakistan and the U.S. The Pakistani Embassy in Washington did not immediately respond to a request for comment. After meeting with Marco Rubio, the Secretary of State, Ishaq Dar, Pakistani foreign minister, said that a deal between the United States, Pakistan and could be reached within days. Trump has tried to renegotiate with many countries the trade agreements that he had threatened with tariffs due to what he called unfair trade relationships. Many economists disagree with Trump's description. Separate statements released by the U.S. State Department, and the Pakistani Foreign Ministry, after Rubio met with Dar last week, stated that the two diplomats discussed the importance of expanding the trade and ties between the two countries in the mining and minerals industries. Dar, speaking last week of U.S. and Pakistan talks, said that "our teams have been here discussing in Washington. We've had virtual meetings. And a committee was tasked by Prime Minister to fine-tune now."
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Grupo Mexico evaluates US investments following the reduction of copper tariff
A senior executive of Grupo Mexico, the world's largest copper producer, said in a Wednesday call that the company is planning to invest in projects within the United States over the next three to five year period. This comes as Washington prepares tariffs for some copper products. After an order by President Trump, the price of U.S. Copper plunged on Tuesday. The shortfall Copper input materials like ores, concentrates, and cathodes were not included in the expected sweeping restrictions. Grupo Mexico said earlier that it saw the proposed tariffs for Mexico as an Investing in the future is a great opportunity Asarco's local subsidiary in Arizona is investing $6 billion to expand copper projects, including the reopening of a closed smelting facility. Leonardo Contreras told analysts on a conference call that, "We're constantly evaluating whether or not we should restart our Hayden operations" in light of recent developments. Contreras said, "We will continue monitoring how these global shifts happen on a day-to-day basis." The tariff was meant to encourage domestic development, but the United States relies on imports to meet nearly half its refined copper requirements. Homegrown projects can take many years to be completed. Currently, the main suppliers are Chile, Canada, and Mexico, although China is their largest buyer. Grupo Mexico stated that while the trade war between China and the U.S. could have an impact on global economic growth, and therefore demand for copper in Asia, it still maintained a “very positive” outlook for the long-term growth of copper in Asia. (Reporting and editing by Natalia Siniawski; Sarah Morland)
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GRAINS-Soybean Futures extend losses due to favorable US weather and weak demand
Analysts said that Chicago Board of Trade soy futures declined for a fourth session in a row on Wednesday. The decline was attributed to favorable weather conditions across the U.S. Midwest, and weak export demand. Wheat futures also declined, while corn futures increased. Forecasts of cooler temperatures and regular rainfall in the Midwest have boosted expectations for large U.S. corn and soy harvests. According to Vaisala, rain over the last week has improved the conditions for crops. In a daily weather forecast, the U.S. Department of Agriculture stated that "most Midwestern crops are well-watered." The most-active soybean futures fell 13-3/4 cents to $9.95-3/4 per bushel, their lowest price since the 9th of April. Farmers will harvest a large crop, as President Donald Trump’s trade dispute against China, the top importer of U.S. goods, is putting pressure on export demand. On Tuesday, U.S. officials and Chinese officials reached an agreement to extend their 90-day trade truce. Trade sources say that China's appetite will likely weaken for soybeans during the peak U.S. season later this year. Record imports in 2025, and tepid animal feed demand have led to a rise in soymeal stocks at home. CBOT soymeal contracts set new contract lows while soyoil contract highs were retreated from. Dhaka official: In other news on demand, Bangladesh approved the purchasing of approximately 220,000 metric tonnes of U.S. Wheat as part of efforts made to reduce trade tensions. CBOT Wheat ended at $5.23-3/4 a bushel down 6 cents, while K.C. Wheat finished higher. CBOT Corn closed 1-1/2 cents higher, at $4.11-1/2 a bushel. Short covering and technical purchases helped support prices. The Asian corn market has also seen a strong demand. The USDA will release weekly U.S. grain export sales data on Thursday. Traders said that the USDA will likely increase its estimate of U.S. corn production in a crop report to be released on August 12. The traders have already cranked up a yield of 181 bushels per acres above the latest estimate by the agency.
LSEG data show that the price gap between east and west for diesel in July is at its widest level in two-and-a half years.
LSEG data on Thursday showed that the immediate July price differential between diesel prices in Asia & Europe widened to a discount near $120 per metric tonne, its largest in slightly over 2-1/2 years.
According to data, the last time the exchange of futures swaps (EFS), the price difference between ICE Gasoil Futures and Singapore Swaps, reached this level was at the end October 2022.
The ICE Gasoil Futures Contract for July expires later this Thursday. As of 0830 GMT, the August EFS had a discount per metric tonne of $35.
A larger EFS spread is likely to encourage swing suppliers from India and the Middle East, to send their cargoes over to Europe in order to take advantage of higher prices.
LSEG's shiptracking data shows that most of the cargoes from the Middle East, India and other countries bound for West of Suez markets are loaded in the first half of July.
James Noel Beswick, analyst at Sparta Commodities, said that the unprecedented rise in European diesel prices created arbitrage opportunities for sending supplies from Asia and the U.S. Gulf Coast to Europe.
A Singapore-based trader stated that the large backwardation of ICE gasoil contracts could pose a risk, as it could reduce the prices of their cargoes when they reach Europe during the second half of July or August.
Backwardation is a market structure in which prices for immediate months are higher than future months.
The July/August ICE Gasoil Spread
August/September
(source: Reuters)