08:54 AM EDT, 07/10/2025 (MT Newswires) -- A new round of tariff letters was unveiled yesterday by United States President Donald Trump, with a letter to Brazil planning to impose a 50% tariff rate on all goods coming to the U.S. starting on Aug. 1, noted UBS.

While a tariff announcement was arguably expected to some extent, the bank thinks the high levy announced on Brazilian goods -- currently one of the highest tariff rate announced by the U.S. so far -- caught markets by surprise.

While the real (BRL) was already under pressure on the back of remarks delivered by President Trump during the day, saying that Brazil hasn't been good to the U.S., the BRL still sold off 2% versus the US dollar (USD) following the U.S. tariff announcement.

According to UBS, the five key takeaways are:

-- The U.S. posted a small trade surplus with Brazil last year, so trade wasn't the main issue. Instead, the letter shows U.S. concerns around the trial of former President Jair Bolsonaro and recent Supreme Court rulings on free speech rights of Americans in Brazil;

-- While previous U.S. letters to other trading partners were quite similar to each other, the letter to Brazil appears more customized;

-- The U.S.justification of Brazil's high tariff rate may signal negotiations could be difficult for now -- it isn't clear how Brazil could ease the U.S. concerns regarding former President Bolsonaro;

-- With sectoral tariffs of 50% on steel and aluminum exports to the U.S. already in place, the new rate would impact the remaining roughly 90% of Brazil exports to the U.S.;

-- Non-trade barriers were also mentioned in the letter, which could be related to Brazil's import quotas, complex customs procedures and subsidies, for example.

Macro risks look contained for now, added UBS. Brazil is a relatively closed economy with total exports of about 18% of gross domestic product and only 12% of exports going to the U.S. But persistent foreign exchange weakness is a risk to watch since it could weigh on domestic financial conditions and investment flows.

Negotiations between the two countries are likely to take place, but Brazil's initial reaction will be key to watch -- President Luiz Inacio Lula da Silva already announced that Brazil would respond with reciprocity -- as well as the potential U.S. response to such a move, said the bank.

Another risk to watch is the 10% tariff that President Trump said he would impose on imports from BRICS countries (President Lula just hosted the bloc's annual summit in Rio de Janeiro).