Another major trade fight is brewing in the Americas — and this time Brazil is pushing back.

U.S. President Donald Trump and Brazilian President Luiz Inácio Lula da Silva spoke by phone on Friday, Aug. 21, as the two countries attempt to prevent their escalating tariff dispute from turning into a full-blown trade war.

The conversation came after the United States imposed 25% tariffs on a range of Brazilian imports, accusing Brazil of unfair trade practices involving areas including digital trade, deforestation and labour practices.

Brazil strongly disputes the U.S. allegations.

Lula has argued that the tariffs are unjustified and harmful to both countries, while his government has begun the process of potentially retaliating against American goods.

Brazil Is Preparing to Fight Back

Earlier this month, Brazil formally triggered a process under its Economic Reciprocity Law, opening the door for the country to impose countermeasures against the United States.

The Brazilian government is now studying which American products or sectors could be targeted if negotiations fail.

That puts Latin America’s largest economy in a similar position to Canada, which is currently dealing with its own escalating tariff battle with the Trump administration.

But the Brazil dispute has another layer: politics.

Brazil is heading into a presidential election in October, with Lula seeking another term and Senator Flávio Bolsonaro — the son of former president Jair Bolsonaro — among his main opponents.

Lula has accused the Bolsonaro family of encouraging U.S. pressure against Brazil for political reasons, an accusation they deny. The tariff fight has already become an issue in Brazil’s election campaign.

Trump and Lula May Be Looking for a Deal

Despite all the tough rhetoric, Friday’s conversation offered a potential path forward.

Trump reportedly told Lula that officials from the two governments should meet soon to discuss the tariffs.

Shortly after the call, U.S. Trade Representative Jamieson Greer contacted Brazilian Trade Minister Marcio Elias Rosa about arranging further negotiations.

Brazil described the conversation between the two presidents as friendly, while Lula reiterated that Brazil remains willing to negotiate.

That’s significant because the dispute has increasingly become about more than tariffs.

Relations between Brasília and Washington have been strained by disagreements over Brazilian domestic politics, environmental policy and the Bolsonaro family. Lula’s government has also accused elements of the U.S. government of interfering in Brazil’s political affairs — an especially sensitive accusation with the country’s election approaching.

Why This Matters Beyond Brazil

Brazil isn’t just another trading partner.

It is Latin America’s largest economy and a major global exporter of products including coffee, beef, sugar, orange juice, oil and agricultural commodities.

A prolonged trade battle between Brazil and the United States could therefore have consequences far beyond the two countries.

And there’s an interesting bigger picture developing across the Americas.

Within the same period, two of the region’s largest economies — Canada and Brazil — have found themselves confronting major new U.S. tariffs.

For now, Lula appears to be pursuing two strategies at once: preparing Brazil to retaliate while keeping negotiations with Trump alive.

Whether that ends with a deal or another round of tariffs could become one of Latin America’s biggest political and economic stories heading into Brazil’s October election.