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The quota-tariff trade defense system, established by the Brazilian Ministry of Development, Industry, Commerce and Services (MDIC) in the first half of 2024 and renewed in 2025, is described by industry participants in very clear terms: it helps, but it does not solve the issue.
In an exclusive press conference held by the Brazilian steel association Aço Brasil on Tuesday December 16, executive director Marco Polo de Mello Lopes and advisory director André Gerdau Johannpeter discussed the adjustments needed for the measure to become truly effective in market control.
“The quota-tariff helped, but it did not solve the issue,” Johannpeter reaffirmed, stressing that the current configuration still leaves “gaps” that allow imports to surge, even in a year of deteriorating results for domestic mills.
Johannpeter emphasized that steel associations and the government have maintained an excellent dialogue, illustrating the government’s real concern and sensitivity regarding the situation of the Brazilian industry.
“I look with a certain optimism at the dialogue, and that we will find some path,” he said. “The government is sensitive, understands the situation, is concerned, and I believe it will help us strengthen commercial defense.”
In the priority agenda for 2026, the actions disclosed by Aço Brasil include renewing the quota-tariff system ahead of its expiration in mid-July; turning it into a “hard quota,” increasing tariffs to around 35%; implementing safeguards and anti-dumping measures; more active border carbon-adjustment mechanisms; and local-content requirements for vehicles, construction, machinery, towers and other steel-consuming segments.
While the commonly used soft quota defines a volume limit that, once reached, triggers a warning or surcharge — in Brazil’s case, raising the regular tariff of about 12.7% to 25% — but still allows imports to continue, a hard quota would establish a rigid and non-negotiable threshold: once reached, product entry would be immediately suspended.
“Hard border is the system that Brazil had in the US for six years,” Lopes recalled. “We had 3.5 million tonnes of semi-finished [steel] to be exported to the United States in a quota. When it hit 3.5 million tonnes, not one single kilo entered the country anymore. If we had this regime today, our issues would be automatically solved.”
The inconsistency of the current quota — described by the executives as “generous,” since it allows the 2020-2022 average plus 30% — fuels much of the criticism.
“To avoid paying that 25% duty, you have to apply to obtain the quota,” Johannpeter explained. “And the quota was extremely generous, because they took the average from 2020 to 2022, plus 30%, which gives a huge breathing room.”
The association stressed that, despite its limitations, the annual renewal of the quota remains essential.
“The sector cannot be left completely uncovered,” Lopes said. He recalled that the negotiation process was complex: “We spent a year and a half negotiating with the government. There is no other productive sector in Brazil that has a system like ours.”
But the bottleneck goes beyond the design of trade policy. According to the executives, Brazil currently operates with an effective tariff of only 7.2% — far below international standards — due to special regimes, trade agreements, tax exemptions, free-trade zones and sector-specific exceptions.
This level is seen as incompatible with the global scenario of trade defense.
“Several countries are practicing 50% [duties on steel imports],” Lopes said, referring to recent actions in the US, EU and Mexico. “This steel that would enter several countries, now all protected with trade barriers, will look for a market where the tariff is 7.2%, not 25%, 35% or 50%.”
The Mexican tariffs announced on Wednesday December 10 were cited as a regional warning.
“Mexico approved tariffs of 25-50% for more than 1,400 products,” Lopes said. “For steel, 249 products with tariffs up to 35%. They did this because they are at risk of losing 320,000 jobs.”
Brazil, which lacks a bilateral agreement with Mexico, will be directly affected.
Among the most urgent measures considered by the sector is the application of anti-dumping duties already investigated and technically confirmed. Several cases await decisions between February and April.
“There are several cases technically proven, and we expect that, being technically proven, they will be applied,” Johannpeter said. “Our concern is the mechanism called public interest.”
The sector describes this instrument as a critical vulnerability.
“Public interest? In our view it is not public interest — it is private interest,” Lopes said. “The one who requests Public Interest is the importer who has already been importing at rock-bottom prices… and wants to continue buying cheap steel.”
The concern is especially relevant because the public-interest procedure can delay or suspend duties, even after dumping has been confirmed. Still, the executives remain confident.
“I am convinced that when it is ready, if it has to be applied, it will be applied,” Lopes said, citing recent government decisions against unfair practices.
China was treated as the central axis in the discussion of structural risks. Chinese steelmakers’ gross margins remain negative, and the government continues sustaining production through multilayered subsidies, according to Aço Brasil’s executives: subsidized credit, tax incentives, discounted energy and raw materials, and asymmetric labor regulations.
“All these subsidies end up creating unfair competition,” one executive said. “The big question is where the jobs will remain. If you keep employment in China and send steel here, you generate unemployment in Brazil.”
The Chinese government also announced that it will begin requiring export licenses starting in January 2026.
“It is very difficult to know what will happen,” Johannpeter said. “It may control quality, certification, or even volume.”
Aço Brasil warned that the tightening of global barriers — especially in the US, where tariffs reach 50-70% — intensifies trade diversion toward more open markets.
“It is a principle of communicating vessels,” Lopes said. “If the tonne is closed here, it will seek to enter where it is open.”
With global overcapacity estimated at 721 million tonnes by 2027, the association expects continued deterioration in market conditions.
The association’s estimates project a 2.2% decline in Brazilian steel production in 2026 and a 1.7% decline in domestic sales. Imports of rolled products are expected to grow another 10%.
“The level of importation is unsustainable,” Johannpeter said. “The sector, in the long run, is not sustainable with this level of results and this level of import.”
Apparent consumption is expected to grow about 1%, maintaining a scenario of healthy demand — but mostly absorbed by imports.
“Part of this good consumption moment cannot remain entirely imported,” one executive said. “We need stronger commercial defense so that domestic producers can participate in this growth.”
Within the Latin American bloc, the executives emphasized that the problem is shared.
“This situation in Brazil is happening throughout Latin America,” they said.
In an exclusive interview with Fastmarkets in early December, Ezequiel Tavernelli, executive director of the Latin American Steel Association (Alacero), reaffirmed the widespread challenges in the region.
“The most important economies in the region — Chile, Brazil, Argentina, Colombia, Peru and Mexico — have lost 4% of industrial power between the 1990s and now,” Alacero’s director said. “When we look at participation by country, Chile, which has just lost its Huachipato industry, lost 7.8% in added value in industry; Brazil lost 7%. This is a lot — we are losing manufacturing capacity.”
The rising entry of Egyptian steel into Brazil, enabled by the Mercosur-Egypt agreement, was also discussed as an emerging risk.
“It was zero and became 150,000 tonnes,” Johannpeter said. “This increase is not normal.”
Discussing relations with North America, Aço Brasil confirmed that the negotiation channel with the US has been reopened after months of interruption, reviving the possibility of renewing the quota agreement that, for six years, guaranteed zero tariff for Brazilian semi-finished exports.
“The agreement can be re-established,” Lopes said. “As in 2018, when the US imposed a 25% tariff on the whole world, Brazil negotiated a quota and paid 0%.”
According to Lopes, dialogues are ongoing, but everything should be better aligned once purely political tensions subside.
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