Brazil and Canada need a partnership built for a harsher world

Formal ties between Canada and Brazil stretch back nearly two centuries, yet the countries have never become close. Brazil appointed a vice-consul in Halifax in 1836, and both later fought in the Italian campaign during the Second World War. The aerospace dispute between Canadian company Bombardier and Brazilian firm Embraer over Ottawa’s subsidies subsequently cast a long shadow over the relationship. For much of the postwar period, both capitals looked toward Washington, D.C.

That neglect is becoming harder to justify. Two-way merchandise trade reached $14.7-billion in 2025, up 15.7 per cent in a year. Brazil is now Canada’s largest trading partner in South America.

The case for closer engagement is strategic as well as commercial. Canada needs to reduce its extreme dependence on the American market. Brazil trades with a wider range of partners, but remains vulnerable wherever Washington exercises outsized influence over finance and market access.

Trade rules offer little shelter when tariffs can be imposed within weeks. Canada and Brazil need to understand where they hold leverage, how they might use it, and what costs retaliation would impose at home.

The renewed Canada-Mercosur free-trade negotiations are the obvious place to start. An agreement would give Canadian companies access to a market of at least 270 million people, and help Mercosur exporters diversify. The hardest obstacles, however, involve agriculture, public procurement, and the protections governments extend to domestic producers. An agreement concerned mainly with tariffs would leave much of the real work undone.

Washington has provided a demonstration of why this matters. In July, it announced 50-per-cent tariffs on selected Canadian goods, scheduled to take effect on Aug. 19. It also imposed a 25-per-cent Section 301 tariff on many Brazilian imports, effective July 22. A separate forced-labour action added tariffs of 12.5 per cent on Brazilian goods and 10 per cent on Canadian goods, again with exemptions.

Canada’s exposure is far greater. In 2025, 71.7 per cent of Canadian merchandise exports went to the United States. Brazil is much less dependent on the American market.

The exemptions tell another part of the story. Washington spared Brazilian beef, coffee, and civil aircraft and parts. For Canada, it carved out energy products, fish, potash, and critical minerals. These are the goods the U.S. finds difficult to replace. They are also where Ottawa and Brasília possess leverage they rarely acknowledge.

Using that leverage carelessly would be self-defeating. Indiscriminate export restrictions could punish domestic producers, raise prices, and encourage American buyers to find other suppliers. Brazil has more targeted options such as temporary export taxes or licensing requirements that could increase pressure without closing trade altogether. Each measure should expire automatically and end sooner if Washington withdraws the tariff or enters serious negotiations.

The purpose is to keep commerce moving while giving affected American companies a reason to press their own government to de-escalate.

Some Canadians have proposed an oil export tax on similar grounds. Prime Minister Mark Carney has played down the idea, warning that it could damage Canada’s reputation as a reliable supplier. The concern is legitimate. Reliability is a strategic asset. Yet, Ottawa still needs to know which tools it could use if the confrontation becomes more serious.

Canada and Brazil need not employ the same tactics. Their economies and vulnerabilities are different. They should instead agree on the conditions that would justify a co-ordinated response. Officials can start by identifying the goods American industries cannot easily obtain elsewhere. They should then determine which measures would create political pressure in Washington without inflicting greater damage in Canada or Brazil.

Brazilian President Luiz Inácio Lula da Silva and Carney could establish the principle together. Neither country seeks escalation. Neither should be left to face economic coercion alone. A public commitment now would make later co-ordination more credible.

China is where the two countries diverge most sharply. Canada approaches Beijing from inside the North American industrial system and the Group of Seven, with security concerns weighing heavily. For Brazil, China is its largest export market, a major source of investment, and an indispensable diplomatic partner.

There is no need to resolve that difference. Canada and Brazil do not require a common China policy. They need greater room to manoeuvre and fewer dependencies that another country can turn against them.

The Bombardier-Embraer dispute once symbolized the limitations of the relationship. The two countries could now co-operate on aircraft certification, maintenance, supply chains, and trade defence.

The Embraer E175 remains in production and fits the limits imposed by American pilot union scope clauses. Its importance to the U.S. regional aviation market helps explain why civil aircraft and parts make awkward tariff targets. American airlines, airports, and suppliers already have a commercial interest in preventing escalation.

Critical minerals offer an even larger opportunity. Canada brings deep expertise in mining finance and engineering. Brazil holds substantial lithium and niobium resources along with the world’s second-largest rare earth reserves. The U.S. depends entirely on imported niobium, while Brazil and Canada are the principal producers of niobium mineral concentrates.

A bilateral initiative could bring together development banks and institutional investors to finance processing and manufacturing in both countries. The governments should also prepare for a crisis in which access to critical supplies is used as political leverage. A supply chain designed only for efficiency will fail when politics intervenes.

Canada and Brazil will continue to co-operate where their interests align and disagree where they do not. The relationship does not require a grand alliance, much less an anti-American front. It needs a handful of serious industrial projects, deeper trade, and a reliable mechanism for consultation when pressure arrives.

Canada and Brazil possess more leverage than either usually admits. The next tariff shock should not find them improvising alone.

Monica de Bolle is a senior fellow at the Peterson Institute for International Economics and a professor at the Johns Hopkins School of Advanced International Studies. Robert Muggah is a political economist and co-founder of the Igarapé Institute and the SecDev Group. Philip Yang is the founder of URBEM, the Institute of Urbanism and Studies for the Metropolis, a senior fellow at the Brazilian Center for International Relations, and a former Brazilian diplomat.

The Hill Times