By 2025, Brazil faces important challenges in both domestic and foreign policy. The country’s political stability, economic growth and international trade relations are shaped by many factors. Brazil’s agenda is dominated by the waning public support for President Luiz Inacio Lula da Silva, the Central Bank’s stance on the economic slowdown, trade wars with the United States (US) and developments on steel tariffs.
Political stability in Brazil is closely linked to economic success as well as public support for the government. However, the latest Datafolha poll shows that public support for Lula’s government is falling rapidly. His approval rating has fallen from 35% in December 2024 to 24% in February 2025.[1] This is one of the lowest levels of support in Lula’s three different presidential terms. At the same time, the percentage of those who view the government’s actions unfavorably has increased from 34% to 41%, while those with a neutral assessment are at 32%.[2]
The main reasons for this decline include economic stagnation, inflationary pressures, criticism of social policies and tensions in international trade policies. Lula’s popularity during his previous terms was high thanks to economic growth and social welfare programs. Today, however, people feel that the government is not doing enough to manage the economy. This could lead to Lula losing political initiative in the coming years.
The Brazilian economy is going through a challenging period due to uncertainties in global markets and fluctuations in domestic dynamics. Central Bank Governor Gabriel Galipolo, while acknowledging a slowdown in the economy, emphasized that taking early measures could be risky.[3] The Bank raised interest rates by 100 basis points to 13.25% in January 2025 and announced a similar increase in March.[4]
However, many economists warn that keeping interest rates at high levels could have a negative impact on economic growth. In particular, increased pressures on private sector investment and consumer spending could push unemployment rates higher. The government may choose to increase infrastructure investment and public spending to stimulate economic growth, but such steps could exacerbate inflationary pressures.
The Brazilian currency, the real, depreciated by more than 20% against the US dollar in 2024. However, it recovered by 8% in the first months of 2025.[5] This recovery has been driven by the Central Bank’s tight monetary policy and the changes brought about by trade policies in the US. However, Brazil needs to make its interest rate policies more flexible and manage trade risks to achieve sustainable economic growth.
US President Donald Trump’s decision to impose a 25% tariff on steel and aluminum imports in 2025 could pose a major economic challenge for Brazil.[6] The US is one of the largest buyers of Brazilian steel and the new duties could significantly reduce Brazil’s export revenues.
The Lula government has responded strongly to this decision, announcing that it may file a complaint with the World Trade Organization (WTO) or impose additional duties on certain products imported from the United States.[7] But such retaliatory moves could worsen trade relations between the two countries. With US annual trade with Brazil exceeding $80 billion, such a trade war would be costly for both countries.[8]
Lula also emphasized that Brazil will protect its economic interests, stating that they want to pursue a harmonious policy in trade relations.[9] In addition to the US steel imports from Brazil, Brazil is expected to impose new regulations on some of its US imports. These developments could reshape the trade ties of Latin America’s largest economy.
The challenges Brazil faces require the country to carefully plan its economic, political and diplomatic moves. Determining the right strategies for economic growth and stability is of great importance. At this point, Brazil needs to take some important steps to ensure its future economic and political stability.
Policies to stimulate economic growth may be prioritized. High interest rates may lead to a contraction in domestic demand. To avoid this, the government can support growth by offering incentives to increase private sector investments. Thus, both local industry can develop and unemployment rates can be reduced. Increasing public investments can also be considered as another important step for economic revival.
Brazil needs to follow a careful diplomatic process in managing its trade relations with the United States. It is important to consider diplomatic avenues before retaliating against issues such as steel tariffs. In order to maintain sustainable trade relations with the United States, Brazil needs to actively pursue negotiations and move towards fair trade agreements. This can help preserve economic ties between the two countries and avoid trade wars.
Regaining public support has become a critical issue for the Lula government. The government needs to prioritize issues such as social policies and unemployment and offer solutions that will bring relief to the population. Rising inflation and the cost of living are factors that directly affect the welfare of the population. Therefore, expanding social support programs and increasing incentives for those most affected by the economic crisis could help the government regain public support.
As Brazil enters 2025 amid complex economic and political dynamics, critical decisions must be made that will determine the country’s future. It is crucial for the Lula government to regain public support, for the Central Bank to take measures to stimulate the economy and for trade relations with the US to be managed in a balanced manner. Brazil’s decisions in the coming months will be decisive for both the country’s economy and global trade dynamics.
[1] “Approval Rating of Brazil’s Lula Falls to 24% from 35%, Pollster Datafolha Says.” Reuters, www.reuters.com/world/americas/brazils-lula-approval-rating-falls-24-35-pollster-datafolha-says-2025-02-14, (Accessed Date: 02.16.2025).
[2] Ibid.
[3] Ayres, Marcela. “Brazil’s Central Bank Chief Says Bank Can’t Act Preemptively on Economic Slowdown.” Reuters, www.reuters.com/world/americas/brazils-central-bank-chief-says-bank-cant-act-preemptively-economic-slowdown-2025-02-14, (Accessed Date: 02.16.2025).
[4] Ibid.
[5] Ibid.
[6] “Brazil Hints at WTO Complaint, Tax on US Products after Trump Steel Tariffs.” Reuters, www.reuters.com/world/americas/brazil-hints-wto-complaint-tax-us-products-after-trump-steel-tariffs-2025-02-14, (Accessed Date: 02.16.2025
[7] Ibid.
[8] Ibid.
[9] Ibid.
