Shifting Sands: How Brazil’s Rare Earths Are Reshaping US-China Relations

When President Trump returned to the White House last year, observers in Brazil anticipated a confrontational stance towards leftist President Luiz Inácio Lula da Silva, who defeated the far-right former president Jair Bolsonaro in 2022. Initial hostility materialized in July with 40% tariffs on Brazilian exports, revoked U.S. Visas for public officials, and sanctions against Supreme Court Justice Alexandre de Moraes, presiding over Bolsonaro’s coup trial.

Bolsonaro and others were accused of attempting a coup d’état, following the storming of government buildings by his supporters in January 2023, an event likened to the January 6th U.S. Capitol riot. Trump denounced Bolsonaro’s prosecution as a “witch hunt,” demanding the trial’s immediate end. However, by November, the White House eased tariffs on key Brazilian exports like beef and coffee, and lifted sanctions against Justice de Moraes in December, signaling appreciation for Lula’s leadership. Discussions are now underway for a potential meeting between Trump and Lula this year.

From Hostility to Opportunity: The Rare Earths Factor

This shift in U.S.-Brazilian relations, observers say, stems from Brazil’s strategic importance as a supplier of rare-earth minerals. “Trump’s expectation was that Brazil would bring some offer [regarding Bolsonaro] to the table, but it didn’t do that, largely because the demands he made crossed a red line and were seen as interventionist,” said Oliver Stuenkel, a political science professor at the Getúlio Vargas Foundation’s School of International Relations in São Paulo. “There was simply no way that Lula could have asked the Supreme Court to stop prosecuting Bolsonaro.”

Bolsonaro was convicted and is now serving a 27-year sentence in prison. Beyond the Bolsonaro case, Trump too attempted to prevent Brazil from enacting stricter regulations on big tech firms to enhance content moderation. This effort also failed.

Since 2014, Brazilian social media companies have faced potential fines for non-compliance with court orders. In July of last year, the Supreme Court further established that these companies have “a duty of care” regarding content deemed criminal under Brazilian law, requiring them to proactively remove posts promoting racism, inciting suicide, or advocating for the overthrow of the government.

The U.S. Seeks to Break China’s Grip on Rare Earths

The Trump administration now seeks access to Brazil’s rare earths, minerals crucial for high-tech products like electric vehicles and artificial intelligence hardware. Brazil holds the world’s second-largest reserves of these critical metals, trailing only China, according to the U.S. Geological Survey.

“At some point, Trump realized Lula had more to offer to him, including a groceries’ inflation reduction [with a tariff lift] than Bolsonaro, who was arrested, convicted, and has been losing his political importance in Brazil,” said Bruna Santos, a director of the Brazil Program at Inter-American Dialogue, a think tank in Washington.

In December, following a phone conversation with Lula, Trump posted on social media that they had “set the stage for very good dialogue and agreement long into the future” and that “much good will reach out of this newly formed partnership.” Much of this renewed goodwill is driven by Trump’s ambition to challenge China’s dominance in the rare earths supply chain. For 19 out of 20 strategic minerals, China is the leading refiner, controlling an average market share of 70%, according to the International Energy Agency.

On February 4th, Vice President JD Vance announced an initiative to forge an alliance focused on the mining, processing, and trading of rare earths, including a $565 million loan to Serra Verde, the sole company in Brazil currently mining these minerals. Brazil’s vast rare-metal deposits remain largely unexplored due to a lack of capital and expertise.

The following day, Lula informed Brazilian news website UOL that he is planning a visit to Washington, with rare earths as a key topic of discussion.

A Strategic Approach: Threat, Negotiation, and Results

“One of the strategies we’re seeing in the Trump administration is basically to develop a big threat, impose high tariffs, then sort of see what the other side is willing to give up and offer,” Stuenkel said. “In some cases it actually worked, but not with Brazil since it’s no longer dependent on the U.S.”

Tariffs were partially reduced in November after impacting essential goods like coffee. Subsequently, the U.S. Supreme Court’s invalidation of Trump’s tariffs led to a new global 15% import tax, with exemptions for products like beef and pharmaceuticals. This outcome still benefits Brazil, representing a 13.6% overall tariff decrease compared to previous measures, making Brazil the largest beneficiary of the policy shift, according to Global Trade Alert.

While a 40% tax remains on Brazilian steel and aluminum, the Supreme Court ruling provides relief for over $21 billion in Brazilian exports to the U.S., according to the country’s National Confederation of Industry.

Beyond the U.S.: Brazil’s Balancing Act with China

The Trump administration aims to counter China’s influence in the Western Hemisphere, but many South American nations are increasingly reluctant to distance themselves from China, which became the continent’s primary trading partner in the 2010s.

Stuenkel suggests that Trump’s insistence on U.S. Dominance in the region may inadvertently strengthen Beijing’s position in Latin America. Even Javier Milei, Argentina’s far-right president and a Trump ally, has no intention of significantly reducing economic ties with China, which are vital to the Argentine economy.

Brazil maintains a long-standing tradition of diplomatic nonalignment. The country exports to both the U.S. And China—steel, fuels, and aerospace products to the U.S., and soybeans, iron ore, and crude petroleum to China. “It would be unfeasible for Brazil to choose” between the U.S. And China, Santos said. “It could push Brazilian industry to a fragmentation, with one catering to the American market, and another one to the Chinese.”