The United States announced a 25% tariff on most Brazilian goods because of unfair trade practices. Brazil, a country that exists, will now pay more to send stuff here. The phrase "unfair trade practices" means we're mad but can't prove anything specific enough to sound smart at a cocktail party.
Another probe into forced-labor enforcement could slap an additional 12.5% duty on top of the 25%. Decision comes next week. So Brazil might face a 37.5% tariff, which is the kind of math that makes day traders open their Robinhood app and search for Brazilian ETFs like they're about to crack the Da Vinci Code. They won't.
Every retail trader who owns EWZ just learned that geopolitical risk is not an Instagram filter you can turn off. They thought emerging markets meant "emerging profits." It meant emerging ways to lose money you didn't know existed. The tariff goes into effect and your portfolio goes into a wood chipper. That's emerging.
The technical setup on Brazilian equities doesn't matter. The chart patterns don't matter. Your Fibonacci retracements are a horoscope written by a drunk gambler. The U.S. government just decided to make Brazilian goods more expensive because it felt like it, and your trendlines did not predict that. They never do.
Brazil exports soybeans, coffee, and iron ore. The United States imports all of those things. We just decided to pay more for them to teach Brazil a lesson it will not learn. This is the kind of 4D chess that ends with both players eating the pieces and declaring victory.
Next week the forced-labor decision drops and some guy in Ohio who bought calls on Vale will Google "what is forced labor" for the first time in his life. He'll read three sentences, get bored, check the stock price, and watch his account balance do an impression of the Hindenburg.
Trade wars are easy to win, except when they're just expensive tantrums with tariffs.
Photo by on Unsplash
Leave a Comment