Brazil holds a rare hand in Trump’s tariff game

Brazil holds a trump card in tariff negotiations with the United States: its subsoil is rich in rare earth minerals coveted by manufacturers in a sector dominated by China.

The South American giant holds the world's second-largest reserves of these elements used in everything from electric vehicles, solar panels and smart phones to jet engines and guided missiles.

China, a US rival which like Brazil is in a tariff standoff with President Donald Trump's administration, holds a near-monopoly on rare earths production.


And for Brazil's Minister of Mines and Energy, Alexandre Silveira, there is "a convergence of interests between our mineral potential and American capital."

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The issue could feature at a possible meeting this weekend between Trump and Brazil's leftist President Luiz Inacio Lula da Silva on the sidelines of a summit of Southeast Asian nations (ASEAN) in Kuala Lumpur.

Lula himself said Friday he was willing to "talk about everything" with Trump, "from Gaza to Ukraine, Russia, Venezuela, critical minerals, rare earths."

Brazil is subject to a punitive 50-percent tariff on certain exports to the United States over the coup trial of Lula's rightwing predecessor Jair Bolsonaro in what Trump has labeled a "witch hunt."

Bolsonaro was sentenced to 27 years in prison last month.

'Geopolitical leverage'

Rare earths are a group of 17 heavy metals considered so critical that it gives them "geopolitical leverage," according to Gilberto Fernandes de Sa, founder of the rare earth laboratory at the Federal University of Pernambuco in northeastern Brazil.

China possesses about half of the world's reserves, approximately 44 million metric tons (about 48 million US tons), and Brazil about 21 million, according to the United States Geological Survey.

China is also a leader in rare earths extraction and refining.

Earlier this month, Beijing announced restrictions on rare earths technology exports, and Washington signed a deal with Australia for access to its vast reserves -- the fourth largest in the world.

The United States has planned negotiations on the topic with China in Kuala Lumpur.

'Window of opportunity'

The distrust between Beijing and Washington presents "a great window of opportunity" for Brazil, according to the minister, Silveira.

"It is American companies that invest the most in rare earths in Brazil," he added.

But Fernandes de Sa said this was mostly extraction, and none of these companies were developing more sophisticated downstream operations in Brazil, such as mineral separation or magnet manufacturing.

He said Brazil would rather benefit from forming partnerships with China in the rare earths sector: "they are the ones with experience in this field."

China is already Brazil's largest trading partner, investing heavily in the South American giant's automotive sector.

But any rapprochement between Beijing and Brasilia -- both members of the BRICS group of emerging economies -- is sure to raise the ire of Trump.

"Brazil's strategic situation is complicated," concluded Fernandes de Sa.