The newly elected Democratic Congress is not going to repeal the sweeping tariffs with a single decree—but it does change the political cost of keeping them in place. Democrats won the November 3 elections with a mandate written by inflation: lowering the cost of living in a country where consumer prices are rising at 4% a year, and where import duties are cited by Federal Reserve analysts themselves as one of the factors preventing inflation from coming down.
What the Democratic Victory Means for Brazilian Exports
It creates pressure, not a guarantee. The Democratic Party won 228 seats in the House and 54 in the Senate in the November 3 elections—a sweeping victory in areas that had previously leaned Republican, such as Texas and Kansas, driven by frustration over the war with Iran, the high cost of living, and the administration's economic management. According to polls cited by Reuters, 90% of respondents expect the new Congress to prioritize the cost of living, and 62% support repealing current import tariffs. For an immediate look at market impacts, our analysis of the market reaction following the midterms is available here on the site.
The October Consumer Price Index (CPI), released on November 10 by the Bureau of Labor Statistics, confirmed the problem: U.S. inflation rose 0.4% for the month—above the 0.3% the market expected—and stands at around 4% annually, up from 3.7% in September. The Tax Policy Center estimated that Trump’s tariffs cost the average American family $920 in 2026. That figure is the political fuel powering the Democratic mandate—and it is precisely what creates an opening for Brazil.
(CPI: +4% p.a.; tariffs as main driver) + New Democratic Congress
(228 House / 54 Senate; anti-tariff mandate) = Real pressure on Trump to negotiate sectoral tariffs with Brazil
How Much the Tariffs Cost Brazil in 2026
The tariff on Brazilian products, announced by the Trump administration in 2025 under Section 301 of the Trade Act and applied starting in August, reached 50% on most goods—though it was softened by the exemption of roughly 700 products, including aircraft, oil, fertilizers, orange juice, and precious metals. Even with the exemptions, the Ministry of Development, Industry, Commerce, and Services reported in July 2026 that 23.1% of Brazilian exports were subject to the new tariff measures.
The impact showed up in trade data: from January to August 2026, Brazil's sales to the U.S. totaled $24.1 billion, a 9.7% decline, and the trade balance shifted to a $3.2 billion deficit for Brazil. In the first half of 2025, the U.S. accounted for 12.1% of all Brazilian exports worldwide; in the same period of 2026, that share dropped to 9.4%.
Among the hardest hit, the fishing sector stands out: the U.S. used to absorb 72% of all Brazilian exports in this segment. In aviation, Embraer—the world's third-largest aircraft manufacturer—estimated that the tariffs add about R$ 50 million to the price of each aircraft sold in the U.S. and projected R$ 20 billion in cumulative tariffs through 2030, an impact the company compared to the COVID-19 pandemic. Leather and machinery are also among the hardest-hit sectors. The case of WEGE3 illustrates the mechanics of the policy: the company identified potential refunds of up to R$ 230 million in tariffs paid in the U.S., serving as evidence of both the accumulated cost and the commercial paperwork waiting to be renegotiated.
Why Congress Alone Cannot Repeal the Tariffs
This is where the opening hits its limit. U.S. tariffs on Brazil were enacted through executive authority—Section 301 and presidential orders—meaning Congress cannot simply vote them away. To reverse them legislatively, Democrats would need to pass a specific bill that Trump could veto; overriding that veto would require a two-thirds vote in each chamber—a supermajority that 228 and 54 seats do not guarantee, especially given the protectionist leaning of some newly elected members.
There is a second hurdle, which is fiscal: the tariffs generated significant revenue for the U.S. federal government—estimated by the Tax Policy Center at roughly $920 per family. Experts consulted by the Brazilian press question "to what extent Democrats will be willing to give up the tax revenue" generated by the tariffs. Moreover, Section 301, the legal instrument underpinning most tariffs on Brazil, would require specific legislation subject to the same veto—whereas the Executive branch can modify them by executive action at any time.
The new Congress takes office on January 3, 2027. Until then, Republicans remain in control of both chambers, and no formal changes are possible. For Brazil, the shortest path runs through direct negotiations with the U.S. Executive branch before then—modeled on the agreement the UK struck with the U.S. (zero tariffs in the aerospace sector) and in the same spirit as ethanol negotiations. China, which extended the suspension of U.S. tariffs ahead of APEC, shows that temporary sectoral agreements are the available short-term tool—and that Trump is willing to negotiate when there is mutual interest.
What to Expect in 2027: Three Scenarios
Trump agrees to sectoral negotiations—as he did with the UK (zero tariffs in aerospace)—and Brazil reaches agreements for fishing, leather, and aviation before the end of the new Congress's first year. Democratic pressure and persistent inflation make concessions viable on the U.S. side.
The new Congress exerts pressure, but negotiations proceed without formal agreements in the first year. Brazil uses WTO challenges as additional leverage. Tariffs remain at current levels, but without further increases. Practical result: the trade deficit with the U.S. stabilizes.
Democrats prioritize domestic issues (healthcare, AI regulation) in their first year, leaving trade off the agenda. The Fed raises rates in December, a strong dollar pressures emerging markets and the Brazilian Selic rate. Tariff reviews are pushed to the next U.S. election cycle in 2028.
What Changes for Brazilian Investors Now
Two channels affect your wallet in different ways and over different horizons. The trade channel—its impact on export stocks exposed to the U.S. market—is medium-term and depends on negotiations. A tariff reduction would benefit companies in animal protein, leather, aviation, and parts of the non-exempt agricultural sector. For investors holding shares in these companies, the practical takeaway is: the door is open, but stock prices will be driven by concrete negotiation news, not the Democratic victory itself.
The monetary channel is short-term and independent of trade negotiations. The October CPI came in higher than expected and confirmed what the market had already priced in: a 25-basis-point rate hike by the Fed in December 2026. Higher U.S. rates mean a stronger dollar, capital outflows from emerging markets, and added pressure on Brazil's exchange rate—which in turn narrows the room for Brazil's Central Bank to cut the Selic rate. For fixed-income investors, this points to an environment of elevated interest rates for longer, both abroad and at home.
U.S. November CPI — scheduled for release on December 10. If it comes in above 0.3% for the month, a 25-basis-point Fed rate hike in December is practically locked in. A dollar above R$ 6.00 and added pressure on the Selic rate are direct effects for Brazilian investors.
Brazil-U.S. sectoral negotiation statements — trigger: any formal notice from the MDIC or USTR (the Office of the U.S. Trade Representative) regarding product or sector discussions. Exporting companies react ahead of the final announcement; waiting for a signed agreement is usually too late.
Swearing-in of the new U.S. Congress — January 3, 2027. The agenda for the first two weeks provides the clearest signal: if trade makes it onto the early agenda, the negotiating window is genuinely open. If not, the tariffs remain in place until at least mid-year.
The Democratic victory creates real pressure on the Trump administration to revisit the tariffs—especially since 4% annual inflation remains the Republicans' primary political vulnerability. However, the policy tool lies with the Executive branch, not Congress; and some newly elected Democrats hold protectionist views that do not favor a broad overhaul. For Brazil, the shortest path is direct negotiation with Trump before January 2027, using the new balance of power as leverage—rather than legislative changes that would still require a two-thirds vote in each chamber to override a presidential veto. The Democratic victory does not rewrite the playing field overnight; it changes the political cost of refusing to negotiate.
