Jason Simon explains why the US-China trade war could benefit Latin America

While he was serving as President of the United States (POTUS), Donald Trump implemented a lot of new policies in an effort to balance trade relationships between the country and China. The ongoing US-China trade war may still not have a clear path to resolution for either of the two countries, but could prove to be extremely beneficial to Latin America. Jason Simon, a global trade and eCommerce expert, explains how Central and South America are gaining ground in the global trade market as a result of the ongoing disputes between the US and China.

Under Trump, the US implemented a number of new tariffs that targeted many Chinese-made goods. The list included items such as metals, machinery, electrical goods, oceangoing ships, medical equipment and more. In total, around $50 billion in tariffs was attached to the complete list, which led to China adding taxes to a number of US commodities. A surcharge of 25% was added to cotton, orange juice, whisky, tobacco, industrial chemicals, vehicles and others.

This has caused a shift in Asia-led trade, now focusing more on Latin American countries. Explains Simon, “Latin America is emerging as a great opportunity for Asia to source commodities as a result of the US-China trade war. The Asian region is beginning to advance further its trade relationship with Latin American countries, as evidenced by the creation of the Pacific Alliance. Now, through that agreement, Asia is importing a significantly greater amount of commodities from Chile, Colombia, Mexico and Peru.”

In return, Asia is also exporting more to those countries and additional growth is coming. The US had, in 2017, withdrawn from the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), of which Chile, Mexico and Peru are a part, and the UK has expressed interest in joining after it completed Brexit. This is leading to Latin America becoming a major source of trade as the disruption in traditional trade channels continue to dissolve.

After Joe Biden took office as POTUS, he began reversing many of the policies his predecessor had implemented. However, renegotiating trade agreements with China was not on the list, nor is it expected to be any time soon. “President Biden has a lot of work to do and is constantly under the gun to make major changes,” states Simon. “However, addressing the trade dilemma between the US and China is not one of the issues he is going to tackle, at least not in the near future. While he may not be as boisterous with his approach, Biden agrees that China has taken advantage of trade agreements that have impacted the US economic stability, and several cabinet members have already indicated that Biden is not going to back down.”

Ultimately, this continued battle will bolster Latin America’s efforts to become a stronger force on the international trade stage. Greater uncertainty in the future of the trade relationship between the US and China is forcing Asia to pursue other options and other trade partners, and Latin America has been quick to respond. In many countries in the region, extensive work is being done to build out local infrastructure to better support global trade, with the goal of commanding a primary role in the industry.

In addition to Asia-Latin American trade, Latin American trade with other regions is getting a boost, as well, because of the US-China trade war. There have been extensive negotiations between the European Union and Mercosur, which includes Argentina, Brazil, Paraguay and Uruguay, to define better tariffs and reduce technical barriers that have preempted the creation of formidable trade alliances. As the US and China continue to struggle with each other, Latin America is taking advantage of the distraction to become a major player on the global trade stage.