The U.S has been found by the WTO (World Trade Organization) to have maintained unfair trade practices because of subsidies extended to cotton farmers. Brazil has threatened to impose tariff sanctions to gain compensation.
Here's the story, excerpted from an article by James Politi and Jonathan Wheatley at ft.com.
Under the Brazilian plan, duties would rise most steeply on cotton products. Many that are currently taxed at between 6 per cent and 35 per cent would be taxed at 100 per cent. The tariffs on beauty products would double, from 18 per cent to 36 per cent. Duties on household goods such as cookers, refrigerators, TVs and video cameras would also double, from 20 per cent to 40 per cent. Duties on cars would rise from 35 per cent to 50 per cent.
Brazil is allowed to impose the tariff increases – worth $560m – after winning a case at the WTO last year. Brazil challenged the legality of direct subsidies to US cotton farmers to protect them against fluctuations in global prices and a loan guarantee programme for international buyers of US cotton.
Brazil could also impose further penalties – known as “cross-retaliation” – on US intellectual property rights, potentially breaking patents in the pharmaceuticals, technology and media industries.The article discusses negotiations ongoing between the two countries to resolve the dispute.
Disclosure: No stocks mentioned.