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The US' 50pc tariff on Brazilian imports — due to take effect on 6 August — is likely to have only a small impact on Brazil's steel trade, market participants have said.

The US is the largest importer of Brazilian slab, a semi-finished steel used in rolling mills. Slab became subject to 50pc tariffs on 4 June under an order that targets all steel imports.

Brazil's slab exports were initially projected to fall by 11pc as a result of the order, but shipments to the US actually surged by 86pc on the year in June.

Brazilian mills agreed deals at reduced prices, and US buyers ended up increasing their take.

The market has adjusted to the new environment, with most of the disruption already priced in before the new tariffs take effect.

Brazil will not retaliate with tariffs on a similar scale, finance minister Fernando Haddad has said. This means US metallurgical coke — a critical input for Brazilian steelmaking — should continue arriving at stable prices.

Pig iron exemption

Pig iron and iron ore are not subject to US tariffs under the new US regime. Some producers suspended output over concerns of a potential 50pc tariff on pig iron — a primary steelmaking feedstock. Brazil provides 70pc of US pig iron imports.

Unlike slab production, which tends to be concentrated among large corporations, pig iron production also relies on medium-sized businesses. These smaller operators would struggle to maintain output with higher trade costs. Pig iron producers are now expected to resume output, given that pig iron is exempt from tariffs.

Some pig iron buyers and distributors had cancelled contracts, declaring force majeure after Trump's 50pc tariff threat on 9 July, a market source said. "Now, of course, they might want to re-validate contracts — but who knows."

While direct steel trade is proving resilient, the US' 50pc tariff on imports from Brazil's machinery and equipment sector could drag down steel demand. The US is the largest export market for Brazilian machinery, and tariffs could result in a 9pc drop in revenue for the sector, Brazilian industry association Abimaq said on Wednesday.

By Isabel Filgueiras