How Latin America tries to cope with Trump's tariffs

DW (English)

Trade between the US and Latin America tops more than a trillion dollars, but tariffs and shifting supply chains are causing uncertainty. How do Mexico, Brazil, and others navigate this changing landscape?

Transcript

00:00How do you see your relationship with Latin America and Brazil?

00:04Great. It should be great.

00:06They need us much more than we need them.

00:08We don't need them.

00:10Shortly afterwards, the U.S. President announced what he called reciprocal tariffs for the entire world.

00:16Most Latin American countries received a 10% tariff.

00:19But what is the state of trade between the United States and Latin America and the Caribbean?

00:24The exchange of goods, including services, between the two markets exceeded $1 trillion in 2023.

00:32According to the UN, this enormous figure is due primarily to Mexico.

00:38In 2024, U.S. trade with its southern neighbour totaled $840 billion.

00:43Brazil followed with $92 billion in bilateral trade,

00:47then Colombia with approximately $36 billion and Chile with $34 billion.

00:54And what goods are we talking about?

00:57The U.S. imports vehicles and auto parts, capital goods, industrial supplies and materials,

01:02food, animal feed and beverages, and consumer goods from the region.

01:06As for exports, it sends industrial supplies and materials, capital goods,

01:12motor vehicles, parts and engines, food, animal feed and beverages, and consumer goods.

01:16But the U.S. maintains a growing trade deficit with Mexico,

01:25which exceeded $170 billion in 2024.

01:29With several other Latin American countries, the trade balance is actually quite favourable.

01:35Experts believe the tariffs imposed by Donald Trump have been used more as a bargaining chip

01:39on migration and fentanyl trafficking.

01:42The question is whether the United States can be self-sufficient in these goods.

01:50Could it adapt to having refineries produce and use the oil produced in the U.S.?

01:55That's very expensive and takes a long time to process.

01:59So for the moment, it would imply an increase in prices.

02:03And the same goes for agricultural goods.

02:04And the same is true for manufactured goods.

02:11Müller Technoplastics of Mexico makes injection-moulded plastic parts for vehicles

02:16and has many customers in the United States.

02:21Clients are trying to relocate projects within the United States

02:24to avoid potential disputes and risks

02:27related to possible decisions by the American market

02:31or the American government.

02:38He explains that clients who decide to relocate

02:41will no longer benefit from the low labour costs

02:43and the lower costs in general in Mexico.

02:48As we know, labour in the U.S. is much, much more expensive

02:52than what we have here in Mexico.

02:53The flexibility we have here is very high,

02:57including when there are peak customer demands,

02:59so we can even manufacture on weekends if necessary.

03:07Other countries can also be affected by having specific industries

03:11dependent on the U.S. market,

03:13such as the Guatemalan textile industry,

03:16which in 2023 exported $2.2 billion worth of textiles,

03:2070% of which went to the U.S.

03:23For the moment, there's a bit of uncertainty,

03:31a bit of concern.

03:33We know of other industries like ours that, for example,

03:36are currently in a period of rest

03:38because they aren't able to absorb the tariff

03:41that was imposed on them.

03:43We have to rearrange work orders.

03:46We have to find a way to react faster.

03:48One thing that many affected companies have in common

03:56is that they hope their country's governments

03:58will negotiate new deals with the U.S.

04:00that will reverse the tariff burden as soon as possible.

04:04But why is there so much talk of uncertainty in Latin America

04:07rather than the economic blow that Trump's tariffs represent?

04:10Firstly, because the real effects can take months to materialise,

04:16since large companies plan their contracts

04:17and supply chains well in advance.

04:21Furthermore, a significant portion of the region's imports

04:24are subject to these tariffs.

04:26So far, oil and certain minerals have been exempt,

04:29meaning the average effective tariff per country can be lower,

04:32and in some cases, much lower than the nominal 10%.

04:36It's clear that the number one strategy

04:40is to maintain good trade relations with the U.S.

04:44in a scenario where potential tariffs are minimised.

04:51On the other hand, industrial powers like China

04:54could expand their influence in the region

04:56due to U.S. protectionist measures.

04:59In 2024, bilateral trade with the Asian giant

05:02exceeded $500 billion

05:03and could grow even more this year.

05:09Latin America will most likely remain

05:11an important trading partner

05:13and an important investment partner,

05:15especially in infrastructure projects

05:17with China in the coming years.

05:20Despite Trump's rhetoric about needing little

05:23from the Latin American market,

05:25productive interdependence with Mexico

05:27makes it a fundamental pillar for the United States,

05:30even without Mexico.

05:32Trade ties with the rest of the region

05:34are significant enough

05:35that an escalation of tariffs would strain both markets,

05:39making negotiations with Washington

05:41and diversifying export destinations

05:43crucial in the coming months and years.

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