The ongoing trade conflict initiated by Trump with China is compelling Latin American nations to make strategic choices regarding their alliances. Donald Trump is strategically involving the United States’ closest neighbors in his ongoing trade conflict with China, aiming to diminish the influence of the Asian powerhouse in a region that has historically been viewed as America’s sphere of influence.
Last week, the president sent US Defense Secretary Pete Hegseth to Panama, continuing his strategy to reinforce US influence over the strategically important canal in the isthmus nation. On Monday, President Biden welcomed El Salvadoran leader Nayib Bukele, a key ally, to the White House. Meanwhile, Treasury Secretary Scott Bessent was in Buenos Aires, where he emphasized the United States’ interest in encouraging Argentina to reduce its dependence on Chinese financing.
The current diplomatic initiative seeks to counter China’s expanding influence in Latin America, where it has emerged as a major source of funding, a key trading partner, and a growing challenge for Washington. Bessent emphasized during a Bloomberg Television interview in Buenos Aires on Monday, “Our goal is to prevent a situation similar to what has unfolded on the African continent.” “China has entered into several agreements labeled as aid, which have resulted in the acquisition of mineral rights and significant increases in debt for these nations.” “They are ensuring that future generations will face increased poverty and resource scarcity, a situation we are keen to avoid, especially given the current circumstances in Latin America,” he stated.
The escalating conflict between the globe’s two largest economies has prompted governments from Mexico to Argentina to confront the reality that their opportunities for substantial trade with Beijing, free from significant repercussions from Washington, are dwindling. This development is increasingly compelling these nations to make strategic choices regarding their alliances. “The path ahead is expected to be more challenging than it has been over the last twenty years,” stated Matias Spektor, an international relations professor at the Getulio Vargas Foundation in São Paulo.
In the early 21st century, China made significant inroads into the Americas, securing a foothold by acquiring raw materials from the resource-abundant South America. This strategic move involved substantial financial investments back into the region, ultimately allowing China to surpass the United States as the leading trading partner on the continent. The Belt and Road Initiative, a cornerstone of economic development, has extended its influence as over a dozen Latin American nations have officially joined the program. Chinese companies have persistently expanded their influence, undertaking significant projects such as the metro system in Bogotá, Colombia, and the recently completed Chancay port in Peru, despite the challenging rhetoric from former President Trump during his administration. Beijing effectively garnered support in Latin America by providing aid and medical supplies during the region’s struggle with Covid-19.
In the current landscape, Trump appears to be demonstrating minimal inclination towards aligning with China’s economic initiatives. He has expressed strong concerns regarding the perceived economic risks associated with Chinese-manufactured vehicles in Mexico, as well as their activities in the Panama Canal. He has even issued a warning about the possibility of “taking back” the waterway that the United States built over a century ago. He has implemented measures since resuming his position that may jeopardize China’s influence. The United States has unveiled plans for “secondary tariffs” targeting nations that import oil from Venezuela, with China identified as the largest purchaser in this context. A consortium of investors led by BlackRock announced last month its intention to acquire ports at both ends of the Panama Canal, which are currently under the control of CK Hutchison, a Hong Kong-based conglomerate.
However, this strategy carries significant risks in a region where China continues to adopt a more amicable stance. During summits in Peru and Brazil last year, Chinese leader Xi Jinping positioned his country as a frontrunner in the realm of economic globalization. Beijing’s efforts to postpone the port sales in Panama are noteworthy; however, experts suggest that it is improbable the country will resort to coercive tactics against its neighbors, according to Michael Hirson, head of China analysis at 22V Research in New York. “China will respond with incentives,” stated Hirson, who previously held the position of the Treasury Department’s chief representative to China during the administration of former President Barack Obama. “The organization has demonstrated adeptness in navigating the political fluctuations in the region, particularly as Brazil and Argentina oscillate between leftist and rightist ideologies.”
In contrast, Washington seems to be employing a strategy focused solely on punitive measures. Bessent indicated that he anticipates Argentina will fulfill its US$18-billion swap line obligation with China; however, he noted that there are presently no discussions regarding any credit line from the US Treasury. In fiscal year 2024, the United States allocated approximately US$2.5 billion in foreign assistance to countries in Latin America, as reported by government data. The future of international aid remains uncertain as former President Trump’s initiatives to dismantle the United States Agency for International Development could potentially impede US engagement in Latin America and beyond. “The United States will not be utilizing the complete array of resources essential for effective competition,” Hirson stated.
According to Christopher Garman, a managing director at the political risk consultancy Eurasia Group, the effectiveness of Trump’s pressure campaign is poised to hinge on the economic reliance of each country on US power. This dynamic may lead to a division between nations situated near the US borders and those located further south. Mexico, Central America, and to a lesser extent, Colombia — recognized as Washington’s closest ally in South America — are closely intertwined with the US economy. Garman stated, “They have nine children and there is no divorce.”
It appears that the largest nations in South America may present significant challenges in terms of influence and persuasion. Trade relations between Brazil and China have experienced consistent growth during the administrations of both the current leftist President Luiz Inácio Lula da Silva and his right-wing predecessor, Jair Bolsonaro. Notably, Bolsonaro did not fulfill his commitments to diverge from the longstanding policy of maintaining amicable ties with communist regimes. The total flows reached approximately US$158 billion last year, nearly doubling the figure associated with the United States. Following the recent tariff announcements from Trump, China swiftly increased its imports of Brazilian soybeans last week.
Argentina’s President Javier Milei, recognized for his alignment with Trump-era policies, has shifted to a more amicable stance towards China following his inauguration. Milei, previously referring to China as a “assassin” during his campaign, has now characterized the nation as a “great trade partner.” In a January interview, he committed to “deepen the commercial relationship” between the two countries. The libertarian has actively pursued enhanced relations with the United States and former President Trump, even proposing a free trade agreement between the two countries. China stands as Argentina’s second-largest trading partner, trailing only Brazil. Milei’s pragmatic approach suggests an understanding that completely distancing himself from Beijing is not a viable option.
“Milei’s pursuit of a free-trade agreement with a nation increasingly adopting protectionist measures is akin to a futile endeavor,” stated Jimena Zuniga, a Latin America Geoeconomics analyst at Bloomberg Economics. “He understands the necessity of implementing a hedge strategy.”