Brazil's Economic Growth Slows Amid Global Conflicts and US Tariffs in 2025-2026

Brazil's economy grew by 2.3% in 2025, marking a slowdown from 3.4% growth in 2024 and representing the lowest rate since the 3.3% contraction in 2020 during the COVID-19 pandemic. This sluggish growth occurred in a complex international environment characterized by geopolitical tensions and trade policy shifts that have impacted Brazil's economic performance.

High interest rates, at 15% since June 2025, have constrained borrowing and spending by both businesses and families, with family consumption stagnating as a result. The fourth quarter of 2025 saw GDP growth of a mere 0.1% compared to the third quarter and a year-over-year increase of 1.8%. Growth was driven mainly by the services sector (0.8%) and agriculture (0.5%), while industrial production declined by 0.7%. Exports rose by 3.7%, and imports fell by 1.8%, aiding GDP growth.

External factors have added further uncertainty. The conflict in Iran threatens to push up oil prices, potentially heightening inflation and prolonging high interest rates in Brazil. Meanwhile, US trade policy fluctuated sharply during this period. In August 2025, the US imposed a "tarifaço," with tariffs reaching up to 50%, partly as retaliation for Brazil's political positions under former President Jair Bolsonaro. Brazilian exports to the US fell 6.6%, but exporters mitigated the impact by diversifying markets, with China remaining Brazil's largest trade partner and the US second.

On February 20, 2026, the US Supreme Court overturned the prior tariff regime, replacing the sweeping 50% tariffs with a more moderate 10% tariff affecting various countries. This adjustment is expected to favor 46% of Brazilian exports to the US.

Amid these challenges, Brazil also dropped in the global economic rankings, falling from the 10th to the 11th largest economy in 2025, with a GDP of US$2.268 trillion. The Russian economy surpassed Brazil despite its ongoing war with Ukraine, buoyed by a nearly 40% appreciation of the ruble currency. Economists cite this currency surge as the main reason for Brazil's rank drop rather than a drastic domestic economic deterioration. Brazil continues to face structural challenges including economic volatility and fiscal policy worries as it approaches the 2026 presidential elections.

Economist Alex Agostini noted that the ruble's sharp appreciation had a greater impact on Brazil's downward movement in global rankings than Brazil’s modest economic growth. Rebeca Palis from IBGE stated that the US tariff increase had a "very specific" and "limited" effect on Brazil’s economy, emphasizing the importance of diversified trade relations.

Overall, Brazil enters 2026 with cautious growth prospects projected at 1.8%, facing the compounded effects of internally high interest rates, geopolitical risks like the Iran conflict, and recent international trade disruptions.