Brazil and U.S. Edge Toward a Trade War with Oil at the Forefront

As tensions simmer between the United States and Brazil, a potential trade war looms, with oil emerging as a central battleground. U.S. President Donald Trump’s threat to impose a 50% tariff on Brazilian imports starting August 1, 2025, has put Brazil’s vital oil export sector under scrutiny. This article explores the trade dynamics, Brazilian oil export volumes, the U.S. refineries reliant on Brazilian crude, and the potential ripple effects on consumers.

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The Stakes: Brazil’s Oil Exports and U.S. Tariffs

Brazil, Latin America’s largest oil producer, has seen its oil industry flourish, particularly in its pre-salt offshore basins. In 2024, Brazil’s crude oil production averaged approximately 3.7 million barrels per day (bpd), with exports reaching around 1.5 million bpd, a significant portion of which flows to the United States. The U.S. is a key market for Brazilian crude, particularly its medium and heavy grades, which are well-suited for Gulf Coast refineries optimized for processing heavier crudes.

The proposed 50% tariff, announced on July 10, 2025, threatens to disrupt this trade flow. Brazil’s government is preparing defensive measures, including a potential emergency oil auction to boost revenue and offset losses from reduced U.S. demand. This tariff could increase costs for U.S. refiners, potentially leading to higher fuel prices for consumers, while Brazil may seek alternative markets like China, which already imports significant volumes of Brazilian crude.

Brazil’s oil exports have grown steadily, driven by production from the prolific Santos and Campos basins. According to Brazil’s National Agency of Petroleum, Natural Gas, and Biofuels (ANP), crude oil exports in November 2024 averaged 1.47 million bpd, with the U.S. accounting for approximately 20-25% of this volume (around 300,000-370,000 bpd). The remainder is primarily destined for Asia, particularly China (40-45%) and India (10-15%), with smaller volumes to Europe.

Brazil’s crude is predominantly medium to heavy, with API gravities ranging from 19 to 28, and sulfur content often exceeding 1%, making it a cost-effective feedstock for complex U.S. Gulf Coast refineries. Key grades include Lula, Buzios, and Mero, which are prized for their consistency and compatibility with U.S. refining infrastructure.U.S. Refineries Relying on Brazilian CrudeU.S. Gulf Coast refineries, which process over 8 million bpd of crude, are major buyers of Brazilian oil due to their ability to handle heavier, sour crudes. Notable refineries include:

• Valero Energy’s Port Arthur Refinery (Texas): With a capacity of 395,000 bpd, this facility processes heavy crudes from Latin America, including Brazil, for gasoline and diesel production.
• ExxonMobil’s Baytown Refinery (Texas): One of the largest in the U.S. at 560,000 bpd, Baytown relies on Brazilian and Venezuelan crudes for its coking units, which maximize diesel and jet fuel yields.
• Marathon Petroleum’s Garyville Refinery (Louisiana): With a 585,000 bpd capacity, Garyville imports Brazilian crude to produce gasoline and distillates.
• Chevron’s Pascagoula Refinery (Mississippi): This 370,000 bpd refinery processes medium and heavy crudes, including Brazilian grades, for a range of fuels.

These refineries benefit from Brazilian crude’s cost competitiveness compared to lighter, sweeter U.S. shale oil. However, a 50% tariff could increase input costs by $15-20 per barrel (assuming Brent crude at $70-80), forcing refiners to either absorb losses or pass costs to consumers.

Potential Impact on Consumers

The proposed tariffs could have a cascading effect on U.S. consumers, particularly at the pump:

1. Higher Fuel Prices: Gulf Coast refineries supply over 40% of U.S. gasoline and diesel. Increased crude costs could raise gasoline prices by 10-20 cents per gallon, assuming refiners pass on the full tariff cost. For context, the average U.S. gasoline price was $3.30 per gallon in July 2025, and a sustained increase could strain household budgets.
2. Regional Disparities: States reliant on Gulf Coast fuel, such as Texas, Louisiana, and Florida, may face steeper price hikes compared to regions served by refineries using domestic shale oil, like the Midwest.
3. Global Market Shifts: If Brazil redirects exports to China or India, U.S. refiners may turn to costlier alternatives, such as Canadian heavy crude or Middle Eastern grades. This could further pressure refining margins, already strained by weak diesel demand and global oversupply.
4. Inflationary Pressures: Higher fuel costs could exacerbate inflation, a concern amid existing trade war fears with China and other nations. Renaissance Macro Research has warned of a potential recession, which could amplify the economic impact of rising energy costs.

Brazil’s Response and Global Implications

Brazil is not standing idly by. The government is fast-tracking an offshore oil auction, potentially in September 2025, to bolster revenue and attract foreign investment, despite tariff uncertainties. This move aims to offset budget shortfalls, as oil royalties and taxes account for over 10% of federal revenue. Petrobras, Brazil’s state-owned oil giant, may also ramp up exports to Asia, leveraging existing trade ties with China, which imported 4.3 million bpd of crude in 2024, including significant Brazilian volumes.

Conclusion

The brewing trade war between the U.S. and Brazil, with oil at its core, threatens to disrupt a critical energy trade relationship. Brazil’s 1.5 million bpd of crude exports, with a significant share feeding U.S. Gulf Coast refineries, face uncertainty under Trump’s 50% tariff threat. Consumers may bear the brunt through higher fuel prices, while Brazil scrambles to diversify its markets and bolster domestic revenue. As geopolitical and economic tensions mount, the oil market remains a volatile arena, with implications far beyond the Americas.

I, for one, am willing to watch President Trump rebalance the global trading field for an America First agenda. It has been turning out that it has not been impacting consumers and getting American First. Brazil will be ok after looking at the volumes, and things will get negotiated. We like all of our Brazilian readers.

For the latest updates on this developing story, stay tuned to Energy News Beat.

Sources: OilPrice.com, Reuters, Brazil’s National Agency of Petroleum, TradingEconomics.com

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