May 2, 2018 / 2:36 PM / 21 days ago

U.S. cuts off Brazil tariff talks, adopts steel import quotas

BRASILIA/SAO PAULO (Reuters) - Brazil on Wednesday contradicted a United States announcement that the two countries had reached a deal on a permanent exemption from steel and aluminum import tariffs, saying the Trump administration had unilaterally cut off talks.

FILE PHOTO: A man walks past aluminum coil at an aluminum factory in Pindamonhangaba, Brazil, June 19, 2015. REUTERS/Paulo Whitaker

Representatives for Brazil’s industry decried U.S. negotiation tactics, which the head of the association for aluminum producers, Milton Rego, called “Al Capone-like.”

“You get better results by pointing a gun to the head,” he said.

Under a new quota-based system, exports of Brazilian steel to the United States fall by around a fifth, dealing a blow to a key sector already grappling with widespread idle capacity and excessive global supply.

The White House said on Monday that it had reached agreements for permanent exemptions on steel and aluminum for Brazil, Argentina and Australia, and that the details of the deals would be finalized shortly. It gave no details of the terms.

Brazil’s foreign and trade ministries said on Wednesday the U.S. government had called off talks on April 26 after giving Brazil the option of picking between tariffs or quotas.

Brazil’s aluminum industry opted for 10 percent import tariffs, while the steel industry opted for an imports quota system, the statement said.

The White House said on Wednesday that details about the agreement had not been finalized and said President Trump would consider re-imposing the tariffs if they were not settled shortly.

“The United States and Brazil reached an agreement in principle on satisfactory alternative means to address the threatened impairment to our national security from steel and aluminum imports,” White House spokeswoman Lindsay Walters said in a statement.

“The details of this agreement in principle have not been finalized.¬†Further, if the alternative means are not finalized shortly, the president will consider re-imposing the tariffs,” she said.

Annual exports of Brazilian semi-finished steel products to the United States, which account for 80 percent of total exports, will be capped at 3.5 million tonnes, equivalent to the average of 2015-2017 exports and a 7 percent decline from 2017.

In a conference call with journalists, the head of Brazil’s steelmakers association, Marco Polo Lopes, called those terms “not that bad.”

But finished steel exports, which compete directly with U.S. producers, will be capped at 496,000 tonnes, or 70 percent of that average, driving an annual reduction ranging between 20 and 60 percent depending on the product.

Brazil still expects the United States to exempt it from trade restrictions, the government statement said, but “remains willing to adopt, in bilateral and multilateral venues, all actions needed to preserve its rights and interests.”

Reporting by Bruno Federowski in Brasilia and Alberto Alerigi in Sao Paulo; Additional reporting by David Lawder and Jeff Mason in Washington; editing by Sandra Maler and Phil Berlowitz

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