Apr 25 / Guilhermo Marques

The continuing uncertainties about the outcome of the global negotiations and their impact on Brazil

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The continuing uncertainties about the outcome of the global negotiations and their impact on Brazil

  • Global trade tensions, driven by the negotiations and imposition of tariffs coordinated by the United States, have created uncertainty about the growth of the world economy.

  • Since the beginning of April, investors have faced market fluctuations due to the disparity between the White House's statements and the market's interpretation of them. This has led to adverse reactions concerning the next steps in the negotiations. As a result, sentiment remains cautious. The US economy had its growth projection reduced to 1.8% in 2025, reflecting the economic slowdown resulting from trade tensions.

  • Concerns about inflation in the United States, coupled with pressure from President Donald Trump for interest rate cuts and rumors about possible changes at the Federal Reserve involving Jerome Powell, have stood out as points of attention in recent days.

  • The USD has been showing sensitivity and uncertainty as a safe-haven currency, causing it to lose value against more solid currencies (EUR, GBP, CHF, for example).

  • Gold continues to reach record highs, surpassing $3,500.00 an ounce recently as investors look for safe-haven assets in times of uncertainty.

Introduction

The global economic situation has been characterized by an atmosphere of uncertainty and a feeling of caution about the outcome of negotiations between the United States and other countries. Among these, China stands out, on which tariffs of up to 145% have been established, with a retaliatory tariff of 125% in response.

The International Monetary Fund (IMF) has lowered its projection for global growth to 2.8% in 2025, down from the 3.3% previously forecast. According to the IMF itself, this revision is due to the uncertainties caused by the tariffs imposed by the United States. The US economy has also had its growth projection revised to 1.8% for 2025 only.

The general sentiment of investors, as well as the market consensus, revolves around the direction these negotiations will take - especially in relation to the actual amounts of the tariffs and the possible reciprocity on the part of the other countries in the face of any final decision adopted by the United States.

Since the beginning of April, investors have experienced market fluctuations due to the divergence between White House statements and their impact on the market, with adverse reactions to the next steps in the negotiations.

Exchange rate

In recent weeks, an interesting trend has emerged as investors increasingly seek out safer assets and currencies. This shift has led to a rise in the value of gold and has contributed to the weakening of the US dollar against major global currencies.

Gold (USD/oz) and behavior of the currencies that make up the dollar index

Source: LSEG, Hedgepoint

The DXY index has been registering recent losses, signaling a general perception of caution on the part of the market towards the United States, historically considered a “safe haven”, but challenged in this historic position.

Change in the DXY over the last 4 

Source: LSEG, Hedgepoint

Donald Trump's harshest criticism of Federal Reserve Chairman Jerome Powell has sent a warning signal about the independence of the US central bank. Trump has demanded immediate interest rate cuts with the aim of accelerating the economy, blaming the current monetary policy as the main cause of the country's economic slowdown.

The tone of criticism intensified to such an extent that rumors of Powell's possible resignation surfaced on April 17 - a speech that was later reversed a few days later, on April 22, by Trump himself. These episodes generated tensions in the markets, which reacted with sharp falls, followed by slight recoveries, but without much optimism. Information mismatches have generated noise and instability, negatively affecting investor confidence.

EUR/USD, GBP/USD and CHF/USD - monthly change YTD

Source: LSEG, Hedgepoint

The impacts on Brazil

We still see a favorable position for Brazil in relation to the unfolding of the tariff negotiations between the United States and the world. So far, Brazil is on the "basic" tariff list, with a 10% tax on its products exported to the US. However, as we already know, the values imposed on Europe and especially China make Brazil attractive for a reordering of global consumption flows, especially in the field of commodities.

We can see that the dollar has been quoted at around R$5.726, the lowest it has been in recent months, following the global scenario of the devaluation of the American currency against other economies, albeit more timidly in emerging countries, but following the same trend. This trend could affect the competitiveness of Brazilian exports, since its product becomes more expensive for the American market at the same time that gains in purchasing power of other currencies could increase its demand in other countries. Thus, if tariffs prevail, it can be expected that major economies, such as China, could migrate their consumption flow from the United States to other origins, such as Brazil, favoring their trade balance and acting as support for the strengthening of their demand.

This trend is expected to occur in highly taxed markets where the United States is a relevant origin and suffers retaliation, for example, or grains. For those in which the US is a net buyer, the expectation becomes more bearish as inflation and economic slowdown may restrict consumption of these goods, especially if they are non-essential.

Summary

The global economy is facing a scenario of uncertainty, especially due to trade tensions between the United States and countries like China. We are cautiously observing the movements of both countries until material decisions are made on the direction of the global economy.

In a scenario of high volatility, risk management against currency exposures becomes essential, especially at a time when investors are migrating to safer assets. This trend has been evident in the depreciation of the dollar. Unlike the usual scenario where the dollar is viewed as a safe haven, the US currency has been weakening due to its significant involvement in the trade war, the US currency has been depreciating. The DXY index fell, reflecting the market's distrust of American economic stability, aggravated by Donald Trump's public criticism of Federal Reserve chairman Jerome Powell.

Regarding Brazil, the country could benefit indirectly from the tariff disputes by maintaining lower tariffs on its products and becoming a viable alternative for exports, especially of commodities.
Written by Guilhermo Marques
guilhermo.marques@hedgepointglobal.com
Reviewed by Livea Coda
livea.coda@hedgepointglobal.com
www.hedgepointglobal.com

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