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In Tolkien’s tales, the fate of a realm is rarely settled in a single battle. Brazil’s voters offered a reminder on Sunday, October 4. Right-wing Senator Flávio Bolsonaro of the Liberal Party (PL) finished first in the presidential first round with 47.03% of valid votes, ahead of President Luiz Inácio Lula da Silva of the Workers’ Party (PT) at 45.16%, according to final electoral court (TSE) totals reported by Extra. Neither man cleared 50%, so the two will march to the gates again in a runoff on Sunday, October 25.
For American readers, the bigger question is economic. What happens to a $135.7 billion trading relationship if the challenger wins? Here is what the first round showed, how markets reacted, and what a Flávio Bolsonaro presidency could and could not change for U.S. trade.
The council has spoken, but only in part
Flávio, the eldest son of former President Jair Bolsonaro, received 56,104,503 votes to Lula’s 53,879,538. The gap of about 2.2 million votes, or 1.87 percentage points, is the narrowest first-round margin on record, according to Extra. Author Augusto Cury (Avante) placed third with 2.89%, followed by Renan Santos (Missão) at 2.24% and Ronaldo Caiado (PSD) at 2.18%.
The result beat the scouts’ reports. In their final Saturday surveys, Quaest had Lula ahead 46% to 45% in valid votes and Datafolha had him ahead 45% to 42%, O Globo reported. Turnout was 78.92% of 158.7 million eligible voters. Abstention reached 21.08%, the highest in a first round since 1998, per Agência Brasil. The right also gained in Congress, where the PL won 28 Senate seats, the largest single-party bloc since 1988, Valor reported.
Lula told supporters, “I admit I was convinced I would win in the first round,” adding, “We are in extra time,” the BBC reported. Flávio said he was “very happy” with the result. The road ahead is not settled. Caiado and Santos, who together drew about 5.3 million votes, have said they will not endorse either candidate. Analyst Rafael Favetti told Reuters that Flávio’s “growth potential in the second round drops precisely because that support has already been front-loaded,” as reported by Al Jazeera.
The Palantír flashes green: markets on Monday
Investors read the result as better odds of a change in government and tighter fiscal policy from 2027. Their reaction on Monday, October 5, was sharp:
- Stocks: The Ibovespa rose 7.70% to a record 206,911.89, its first close above 200,000 and its biggest one-day gain since March 24, 2020 (Dow Jones Market Data via Morningstar).
- Currency: The dollar fell 4.12% to 5.0022 reais (CNN Brasil), down from 5.2173 on Friday. That was its steepest daily drop in eight years (Exame).
- Rates: The January 2031 interest-rate future fell from 13.99% to 12.655%. B3, the São Paulo exchange, had to widen daily trading limits twice (Valor).
- Wall Street: The iShares MSCI Brazil ETF (EWZ) jumped 12.57% to $42.99, because the stronger real added to the stock gains (The Rio Times).
Still, a seeing-stone shows only part of the future. In 2022, Jair Bolsonaro also beat the polls in the first round and the index rose 5.54% the next day (UOL). Lula won the runoff anyway.
Voices from Washington, and the allegations
President Trump called the result “close, but a very, very big victory. Amazing, actually,” Reuters reported. Earlier, in a Truth Social post that briefly misnamed the country as India, he praised Brazil’s same-day count without naming a candidate, CNN Brasil noted. Secretary of State Marco Rubio was more reserved: “Well, it’s going to a second round. I think everybody expected that it would, so we’ll see how that plays out,” according to the State Department transcript.
Democrats have raised allegations of interference. On September 24, 30 House Democrats and Sen. Bernie Sanders wrote to Rubio about “an apparent effort to interfere with, and potentially undermine” Brazil’s election (The Guardian). On September 29, Sens. Jeanne Shaheen, Tim Kaine and Peter Welch asked the administration to commit to recognizing the certified outcome (Senate Foreign Relations Committee). The State Department rejects the charge: “Any insinuation of a ‘ploy’ to undermine a democratic nation’s election is a baseless lie,” an official told The Guardian.
Whether these moves amount to interference is disputed. The moves themselves are on the record. Treasury sanctioned Supreme Court Justice Alexandre de Moraes in July 2025 and lifted the sanctions on December 12, 2025. Flávio met Trump in the Oval Office on May 26, 2026 (Reuters). State designated the PCC and Comando Vermelho gangs as terrorist organizations two days later. In August, Washington revoked the visa of Brazil’s ambassador.
The toll gate on the Great River: where trade stands
Brazil is one of the few large economies with which the U.S. runs a surplus. In 2025, U.S. goods exports to Brazil were $54.3 billion and imports were $39.9 billion, a $14.4 billion goods surplus. The U.S. also ran a $27.4 billion services surplus, according to USTR.
Even so, the toll gate is up. The Supreme Court struck down Trump’s emergency tariffs, including the roughly 50% rate of 2025, in February. USTR then imposed a 25% Section 301 tariff that took effect July 22. It covers farm machinery, wood, ethanol and apparel, among other goods. Beef, coffee and aircraft are exempt. Brazil’s government and its industry confederation (CNI) estimated $7 billion to $11 billion of exports were hit (Reuters). On July 24, a separate 12.5% forced-labor tariff stacked on top, lifting many goods to 37.5% (Valor International). USTR’s grievances include digital trade, the Pix payment system, intellectual property, ethanol and deforestation (USTR fact sheet).
If Flávio wins: what could change
- A faster Section 301 negotiation. In July, Flávio proposed bringing Brazil into a free-trade pact with the U.S., Mexico and Canada (CNN Brasil). His platform promises diplomatic fixes for sanctions on Brazilian products (Metrópoles). Brazilian negotiators told Estadão they believe Washington is waiting for the election because it would find a Flávio government easier to deal with.
- Less retaliation risk for U.S. tech and pharma. Brazil’s Economic Reciprocity Law could suspend intellectual-property protection for seeds, drugs and technology (PIIE). Lula’s government said in July it would begin those procedures, though officials saw their use as remote (Valor International). A Flávio government would be far less likely to use that weapon.
- Ethanol for the Corn Belt. U.S. ethanol sales to Brazil fell to $96 million in 2025 from a $761 million peak in 2018 (USTR). Restoring tariff parity would be a cheap concession for a friendlier Brasília to offer.
- The dwarven forges: pig iron and steel. Brazil supplies more than half of U.S. pig iron imports, which are exempt from the 25% tariff (PIIE). Brazilian steel still faces Section 232 duties, a separate global regime that would need a deal of its own.
- Embraer and aviation. Aircraft and parts are already exempt, so a deal would mostly lock in that status rather than open new ground.
- Rare earths: talks, not treasure. Brazil holds about 21 million metric tons of rare-earth reserves, second only to China (Agência Brasil). Two U.S. proposals have gone unanswered, and a U.S. diplomat said, “We’ll probably have to wait till the election, no matter what happens” (SCMP). No federal deal exists yet.
What would not change quickly
No ring of power rewrites geography. Brazil belongs to Mercosur, and PIIE notes that the U.S. demanded exclusive tariff concessions that Brazil cannot legally grant one country under its trade law and bloc obligations. A full free-trade deal would take years. China took 77% of Brazil’s soybean exports in 2025 (Valor International), so the Shire’s soybean farmers in Iowa and Illinois will keep competing with Brazil in Chinese ports regardless of who governs. The EU-Mercosur interim deal has applied since May 1, 2026. And nothing changes before a January 5, 2027, inauguration (G1), so the current tariffs stay until there is a deal.
What it means for your wallet
- Groceries: Coffee, orange juice and beef are already exempt from the Section 301 tariff, so the election does not change their tariff status. A stronger real can make Brazilian goods somewhat pricier in dollars, though.
- Investors: EWZ and Brazilian ADRs have priced in a lot of good news. If the October 25 runoff goes the other way, those gains could reverse quickly.
- Exporters and farmers: A stronger real makes U.S. goods cheaper in Brazil. A deal could also reopen the ethanol market.
- Travelers: A trip to Brazil costs about 4% more than it did on Friday.
The road goes ever on, but for now it runs through one more Sunday. Flávio Bolsonaro starts the runoff as the favorite in the markets, not yet at the ballot box. Until October 25, Americans should treat any trade thaw as a possibility, not a promise.