Brazil's government has authorised nearly BRL13.3bn ($2.6bn) in extraordinary credit to shore up its rural sector after Washington imposed a 25% tariff on Brazilian goods, while President Luiz Inácio Lula da Silva pledged to answer the move with a "war of truth" rather than retaliatory action.

The credit package, published in an extra edition of the official gazette on July 17, allocates BRL9bn for rural technology projects aimed at boosting productivity and competitiveness, and a further BRL3bn for a debt-refinancing programme to help rebalance borrowers' finances.

Another BRL270mn was earmarked as economic subsidies for independent sugarcane producers in Brazil's Northeast, who have been hit both by extreme weather and by the new US duties, while BRL1bn was set aside for student-loan beneficiaries and BRL15mn for Brazil's voluntary contribution to the Inter-American Court of Human Rights.

The measure takes effect immediately for a limited period, pending approval by Congress.

Brazilian Finance Minister Dario Durigan said the government could unveil further support by early August for sectors affected by the US trade measures.

The package follows last week's announcement by President Donald Trump's administration of a 25% tariff on numerous Brazilian products, which Washington attributed to what it called unfair trade practices by Brazil.

Brasília has rejected that justification, with the presidency describing the tariff as a "regrettable milestone" in bilateral relations and noting that the US has accumulated a $424.5bn trade surplus with Brazil over the past 15 years.

The government has said it will pursue the matter through the World Trade Organization's dispute settlement mechanism, alongside domestic countermeasures.

While Brasília has signalled it is prepared to escalate through legal and trade channels if talks fail, the credit package points to a parallel strategy of cushioning exposed domestic industries — from sugarcane growers to rural borrowers — as the tariff dispute continues to unfold.

Speaking at a public event in Rio de Janeiro, Lula said Brazil would respond with information and argument rather than confrontation, and that Trump "will have to learn to use the weapon of words" instead of resorting to unilateral measures.

"Brazil has no interest in waging war. Here we are people of peace. The war I want to wage with him [Trump] is the war of narrative, the war of truth," Lula said.

He added that Brazil would continue seeking a negotiated solution, while reiterating that the country would not renounce its sovereignty or accept external pressure, though it retained legal mechanisms to respond if necessary.

Amid the diplomatic standoff, Brazil's instant coffee sector was confirmed exempt from the new tariff, a carve-out that industry group Cecafé said would protect between $2bn and $2.5bn in annual exports to the US, Reuters reported.

Instant coffee had been the only segment of Brazil's coffee trade still subject to US duties even after the Trump administration lifted tariffs on most other Brazilian products last year, including green coffee beans and flavoured instant coffee varieties.

Brazilian instant coffee exports to the US fell by nearly 30% in 2025 compared with the previous year as the sector struggled under the levies, according to the Brazilian Instant Coffee Industry Association (Abics).

Cecafé director general Marcos Matos said the exemption reflected joint lobbying efforts by his organisation and the US National Coffee Association.

The tariff dispute has also become entangled in Brazilian domestic politics, with the government blaming the deterioration in relations on the family of Trump-aligned former far-right President Jair Bolsonaro, whose son Flavio will likely face Lula in the October presidential election.

Brasília has signalled it will keep both diplomatic and legal channels open, even as it prepares the reciprocity mechanisms for possible use.