Brazil ETF Gains as Trump-Lula Call Signals Thaw in Trade Relations
A productive phone call between the U.S. and Brazilian presidents follows the recent removal of a 40% tariff, boosting investor sentiment for Latin America's largest economy.
A high-level phone call between U.S. President Donald Trump and Brazilian President Luiz Inácio Lula da Silva has solidified hopes for a significant improvement in trade relations, placing a spotlight on Brazilian equities and the closely watched iShares MSCI Brazil ETF (EWZ).
The discussion, described by officials as “very productive,” adds momentum to the recent U.S. decision to scrap a contentious 40% tariff on a wide range of Brazilian food products, a move that has been welcomed by investors and exporters alike.
Tariff Reversal Paves Way for Diplomacy
The diplomatic overture follows the White House's removal in late November of the steep tariff on over 200 Brazilian goods, including key exports like coffee, beef, and fruits. The tariffs were first imposed in July 2025, creating a significant hurdle for Brazilian producers. The reversal is viewed by market analysts as a key de-escalation of trade tensions between the two largest economies in the Americas. Some commentary suggests the decision was partly motivated by a desire to ease inflationary pressures within the United States, according to a report from Tridge.
During the 40-minute call on December 3, President Lula reportedly thanked his U.S. counterpart for lifting the tariffs and expressed Brazil's desire to advance negotiations on other products that remain subject to import duties. In a statement, President Trump called it a “great” conversation and signaled a desire for a stronger partnership moving forward.
Market Response and ETF Performance
Investor optimism surrounding the improved trade environment has provided a significant tailwind for Brazilian assets. The iShares MSCI Brazil ETF (EWZ), a key benchmark for U.S. investors seeking exposure to Brazilian companies, has been a standout performer in 2025. The fund has surged approximately 48% year-to-date, making it one of the top-performing single-country ETFs.
While the ETF's price showed modest fluctuations in the days leading up to the call, hovering between $33.40 and $33.67, the confirmation of a diplomatic thaw provides a strong fundamental catalyst. Analysts have expressed “cautious optimism” for EWZ, with some forecasting it could outperform the S&P 500 over the next year, as noted by TipRanks.
Brazilian equities have been a primary engine of returns in the emerging markets space this year, successfully navigating the earlier trade disputes. The removal of punitive tariffs is expected to bolster corporate earnings, particularly in the agricultural and food processing sectors, which are heavily represented in the MSCI Brazil index that EWZ tracks.
Broader Economic Implications
The warming relations have implications beyond financial markets. For Brazil, normalized trade with its second-largest trading partner is critical for economic stability and growth. The tariff relief provides immediate support to the country's powerful agribusiness sector, a cornerstone of its economy.
Beyond trade, the two leaders also discussed strengthening cooperation to combat international organized crime, indicating a broadening of their collaborative efforts. This marks a significant turnaround from the strained relations seen earlier in the year, which were marked by disagreements over environmental policy and trade.
Looking ahead, investors will be closely watching for further progress on a definitive trade agreement. While the recent developments are a significant step, the path forward will likely involve detailed negotiations on a product-by-product basis. However, the positive tone set by the two presidents has established a constructive foundation, bolstering the case for continued investment in the Brazilian market. As Seeking Alpha analysis suggests, the outlook for Brazil appears increasingly favorable heading into the new year.