Brazil Auto Industry Offers Warning To United States
As US President Trump’s tariffs on the automobile industry spark into action (no pun intended), economists are drawing comparisons with Brazil as a case study in the dangers of protectionism.
Over a decade ago, the Brazilian government put up trade barriers in its auto market, promising local manufacturing, jobs and better cars. The then ruling Workers Party, with longstanding ties to the auto-workers’ union increased duties by 30 percent on the majority of foreign cars and halved taxes on locally manufactured vehicles.
However, after car manufacturers initially rushed to open factories, the industry has since witnessed closures, job losses and seen its local production slashed. Right now, Brazilians often pay around 50% more for the same car models as neighbouring countries and its automotive technology is lagging behind.
When the new policies were first introduced, car imports declined and local production rose to a record 3.71 million vehicles during 2013, after several major car manufacturers opened Brazilian assembly lines, including Mercedes-Benz.
However, many struggled to reproduce the same efficiency and as inflation started to rise, domestic demand nose-dived. Mercedes-Benz shut down their Brazilian car plant after just four years and then Ford Motor closed its final factory after a century in the country.
The recent U.S. tariff announcements perhaps demonstrate that President Trump has not paid attention to Brazil’s recent history.
