Brazil’s auto deficit rises 835% amid Chinese surge, Argentine slump - Valor International

While Brazil’s overall trade surplus is expected to exceed initial forecasts this year, buoyed by oil and soybean exports, its automotive trade deficit is widening. From January through September, the deficit reached $5.53 billion, the largest ever recorded for the period and 835% higher than the $591 million posted in the same months last year. This year’s result reflects not only rising imports but also declining exports. Over the same nine-month period, Brazil’s overall trade balance posted a surplus of $62.4 billion.

Driven by Chinese electrified vehicles, vehicle imports also reached a record $9.42 billion for the period, up 76.7% from 2025. Car exports, meanwhile, lost the momentum provided by Argentina’s economy in 2025 and fell 18% over the period, according to data from the Ministry of Development, Industry, Trade, and Services (MDIC).

Preliminary figures for October show that the trend in Brazil’s passenger car trade balance has not changed. Through the fourth week of the month, imports totaled $1.04 billion, up 138% on an average-daily basis. Cumulative imports from the beginning of the year through the fourth week of October reached $10.46 billion. Car exports in October through the fourth week totaled $297.87 million, down 11.1% in average daily terms from the same period in 2025.

This trend is likely to continue through the end of 2026 and is unlikely to change in the short term, said José Augusto de Castro, president of the Brazilian Foreign Trade Association (AEB). Beyond that, he said, the outlook will depend on several factors, including any potential shift in U.S. trade policy following President Donald Trump’s defeat in the midterm elections, developments in the Middle East conflict, and the course of other protectionist measures around the world.

Castro noted that China is the main source of pressure on the import side. From January through September, Brazil imported $6.26 billion worth of Chinese cars, more than double the $2.36 billion recorded in the same months of 2025. In 2024, the figure was $2.86 billion.

The numbers stand in sharp contrast to those for 2023 and 2022, when imports from China totaled $540.5 million and $134.7 million, respectively. In the first nine months of this year, China accounted for 66.5% of all cars imported by Brazil. Argentina ranked second, with 11.3%. Until 2023, Argentina had historically been Brazil’s leading foreign supplier of vehicles.

“There has been a rapid shift over the past two years,” Castro said. As protectionist measures targeting China have intensified in several major markets, Beijing has gained ground elsewhere by adopting a more aggressive trade policy, a trend he does not expect to change significantly.

Brazilian automakers are facing competition from Chinese manufacturers not only in their domestic market but also in neighboring countries, including Argentina, the main foreign destination for Brazilian-made cars.

According to Argentine government data, imports of Chinese cars reached $916.8 million from January through September, more than triple the $292.6 million recorded in the same period of 2025. Imports of Brazilian cars were higher, at $2.14 billion, but fell 30%. Last year, for every $10 Argentina spent importing Brazilian cars, $1 went toward vehicles shipped from China. This year, the ratio has shifted to $2 for every $1. Despite the decline, Argentina remains the largest foreign buyer of Brazilian cars, accounting for 54.6% of the total.

Rafael Cagnin, chief economist at the Institute for Industrial Development Studies (IEDI), noted that the comparison base for Brazilian exports to Argentina is relatively high. With support from multilateral organizations and the U.S., Argentina was able to improve its access to foreign currency, preventing inflation from returning to its previous levels. “Last year, there was a window of opportunity that Brazilian exporters took advantage of to expand sales.”

Brazilian car exports to Argentina totaled $3.1 billion from January through September 2025, more than double the $1.4 billion recorded in the same months of the previous year, according to MDIC data.

“This year, that momentum has lost steam,” Cagnin said. In absolute terms, the decline in car sales to Argentina exceeded the drop in Brazil’s total vehicle exports to all destinations combined from January through September.

Welber Barral, a partner at BMJ and a former foreign trade secretary, recalled that there had once been expectations that sales of Brazilian cars to other South American countries could offset the losses in the Argentine market, which was already in crisis. That strategy has fallen by the wayside, he said, as China has also been gaining ground in other markets across the region.

Chinese government data show that exports to countries such as Colombia and Chile have surged this year. Vehicle sales to Colombia rose from $415.3 million in 2025 to $1.5 billion this year. Exports to Chile increased from $661 million to $1.2 billion. Both figures cover the January-September period.

“Since the 2008-2009 crisis, we have seen China make steady inroads into international trade in manufactured goods in South America. And this new wave of trade barriers, not only in the U.S. but also in Europe, is having a major impact on the automotive industry. European automakers, particularly German manufacturers, are losing competitiveness, and trade is being diverted. Brazil has a higher average income level than, for example, the African continent, and it has a large population. One defining feature of Latin America is its heavy reliance on road transportation, given the shortcomings of public transit and rail infrastructure. The region is an important growth market for China,” Cagnin said.

In Brazil, he noted, imports of Chinese vehicles accelerated from January through June as buyers and automakers sought, in part, to get ahead of higher import duties on electrified vehicles that took effect in July. The rates rose to 35%, from 25% to 30%, depending on the technology.

Brazilian imports of Chinese cars slowed in July and August but picked up again in September, Cagnin said. “In this case, the import duties softened the curve but did not stop imports from growing. This is part of a broader trend in which Chinese manufacturers are establishing themselves as major global suppliers of electric vehicles. They have also built market acceptance that will be difficult to reverse.”

China is also gaining ground by offering more competitive prices, Barral noted. Data from the Foreign Trade Indicator (Icomex), published by Fundação Getulio Vargas’s Brazilian Institute of Economics (FGV Ibre), show that through September, average prices of durable consumer goods imported by Brazil from China fell 5.4% from the same period in 2025. Prices of goods from Argentina rose 1.1%, while those from the European Union increased 13.6%. Meanwhile, the volume of imports in the same category rose 123.3% for Chinese goods. Imports from Argentina and the European Union fell 16.1% and 2.2%, respectively.

The faster influx of Chinese cars this year has sparked a price war in Brazil, with automakers competing through promotions and discounts. Economists have noted that this is also reflected in the country’s official inflation index, the Extended Consumer Price Index (IPCA). In Brazil’s mid-month inflation index, IPCA-15, a reliable predictor for the October inflation reading, new car prices rose 0.93% year to date. Used car prices, meanwhile, fell 1.8%. The overall IPCA-15 increased 4.15% over the same period.

Cagnin stressed that not only the automotive industry in Brazil but also automakers’ parent companies are struggling to compete with Chinese manufacturers in their home markets. “There is a technological race among players in the global automotive industry, and China, with its EV paradigm, is outperforming everyone. This is also playing out in Brazil and is reflected in our vehicle trade balance. It is a trend that is here to stay.”

Barral noted that the European Union said last month that China had agreed to limit projected exports of hybrid vehicles to the bloc over the next four years. Brazil needs to follow these negotiations closely, he said, because they could affect domestic vehicle production, both through restrictions on market access and the likelihood of greater trade diversion toward emerging markets.

For Cagnin, one way forward for Brazil is to attract investment in EV production. “We have expertise in biofuels that this fully electric model does not take advantage of. There is a technological issue to consider, but what matters most in the short term is creating the conditions to attract investment and mobilizing our large domestic market to turn it into a springboard for exports to the region,” he said.

“At a time when there is growing concern about CO2 emissions and the vulnerability of global value chains—whether because they are too long, as in the automotive industry, or because of logistical issues and transportation costs linked to geopolitical conflicts involving the Middle East and oil-producing regions—an opportunity is opening up to make Brazil an export platform for Chinese automakers serving the broader Latin American market,” Cagnin said. He stressed that this strategy would require greater competitiveness in Brazil and noted that the country has struggled to retain automakers that had already established operations there.

This article was translated from Valor Econômico using an artificial intelligence tool under the supervision of the Valor International editorial team to ensure accuracy, clarity, and adherence to our editorial standards. Read our Editorial Principles.