BRASILIA (Reuters) - The Brazilian government has shelved a proposal to tax big tech firms, due in part to concerns that the move could be seen as a response to U.S. President Donald Trump's tariff threats, two officials with knowledge of the matter told Reuters.

Instead the sources, who spoke on condition of anonymity, said Brazil's government will focus on advancing a separate bill to regulate competition among major digital platforms in Latin America's largest economy.

That legislation, which went to public consultation in January 2024, aims to combat business practices stifling rivals, such as "killer acquisitions" and the privileging of a company's own products or services in search results.

In September, government officials had said they would submit to Congress a tax on major global tech firms if federal revenue projections for the second half of 2024 fell short.

That measure would affect U.S.-based tech titans such as Amazon ( AMZN ), Alphabet's Google and Meta, the owner of Facebook and WhatsApp.

One of the sources said the government has become wary about the timing of sending such a bill to Congress, where it cannot be sure how quickly it would move. Raising taxes on such high-profile U.S. companies could complicate the trade talks spurred by Trump's tariff proposals, the source added.

The official noted that Brazil is still in the dark about Trump's plans for April 2, when he has vowed to sharply raise U.S. tariffs to match those of other countries.

On Monday, Trump said not all threatened tariffs would take effect on April 2 and some countries may receive exemptions, which Wall Street welcomed as a sign of flexibility after weeks of market turbulence.

Trump has called Brazil's ethanol tariffs unfair. Brazilian Finance Minister Fernando Haddad said last week that his government expects lengthy tariff talks with Washington, as Brasilia pushes to combine negotiations on sugar and ethanol.