Brazil shelves tariffs of 120% on Argentine milk powder after retaliation threat

Brazil suspends measure before implementation

Brazil has shelved a decree that would have imposed a 120% tariff on milk powder from Argentina, stepping back before the measure entered into force, according to a column published by Brazilian broadcaster Itatiaia. The planned duty was presented as protection for small and medium-sized Brazilian dairy farmers facing pressure from imported milk powder.

The measure would also have applied a 110% tariff to milk powder from Uruguay. Itatiaia columnist Valdir Barbosa described the proposed rates as exceptionally high and argued that imported Argentine and Uruguayan powder had been depressing the prices received by domestic milk producers.

The source did not provide the existing tariff rate, affected import volumes, implementation date or legal basis for the planned duties. It also did not specify whether the proposal involved an ordinary customs tariff, an anti-dumping measure or another form of trade remedy. Those distinctions are important because Brazil, Argentina and Uruguay are members of Mercosur, where internal trade is generally governed by preferential rules.

Argentina threatens WTO case and countermeasures

Brazil’s retreat followed pressure from the government of Argentine President Javier Milei. According to Itatiaia, Argentina threatened to take the dispute to the World Trade Organization and to impose additional tariffs on engines, automotive parts and cargo trucks imported from Brazil.

The column argued that retaliation against those manufactured products could cause Brazil greater losses than the dairy measure would impose on Argentina. It did not provide values for the trade at risk or identify specific tariff rates that Buenos Aires was considering. No formal Argentine list of targeted Brazilian goods was included in the source material.

The prospect of countermeasures widened what began as a dairy-sector dispute. Brazilian vehicle and component producers have commercial exposure to Argentina, while Brazilian dairy farmers compete with suppliers in neighboring Mercosur countries. A tariff exchange could therefore have affected two distinct production chains: agricultural imports entering Brazil and industrial exports moving in the opposite direction.

Dairy producers remain exposed to import competition

With the decree suspended before taking effect, Argentine and Uruguayan milk powder will not face the proposed rates described by Itatiaia. The immediate outcome removes the threatened cost increase for exporters and Brazilian buyers of imported powder, while leaving domestic milk producers without the protection anticipated under the proposal.

The episode also highlights the constraints on unilateral tariff action within an integrated regional market. Brazil’s government sought to respond to complaints from dairy farmers, but Argentina’s warning linked that intervention to Brazilian industrial interests and the possibility of WTO litigation.

Further clarity will depend on whether Brazil replaces the shelved decree with a narrower trade-remedy investigation or another form of support for dairy producers. The source reported no alternative measure. For now, the proposed 120% and 110% tariffs remain suspended, and the commercial conditions for regional milk powder trade are unchanged by the abandoned decree.