Trump’s Trade Tariffs: A Mixed Bag for South America, Opportunity for US Consumers?
WASHINGTON — President Trump’s recent imposition of trade tariffs has sent ripples throughout the global economy, with South American nations bracing for both potential gains and notable risks. While some analysts predict a boon for the continent’s commodity-rich economies, others caution against oversimplifying the complex web of international trade instability.
Ten of the twelve South American states initially received the lowest tariff level of 10%. Guyana and Venezuela were initially hit with higher rates of 38% and 15% respectively, before these were subsequently reduced to 10%. This came as Trump decided to pause elevated rates on almost all countries for 90 days. The exceptions are China, which has been hit with 145%, and Canada and Mexico, which have still got 25% tariffs on some exports to the U.S.
The tariffs, designed to bolster domestic production and protect American industries, coudl inadvertently open doors for South American exporters seeking to fill voids left by countries facing steeper levies.
Potential Upsides: Soybeans, Beef, and Beyond
South America, notably Brazil and Argentina, stands to benefit from increased demand for it’s agricultural products. The U.S.’s hefty tariffs on Chinese goods, coupled with China’s retaliatory tariffs on U.S. imports, may create opportunities for South American exporters.
For example, “Brazil could increase agricultural exports to china to replace previous U.S. supplies,” as China is already Brazil’s largest export destination, followed by the U.S.
Frederico D’Avila, a farmer and ex-politician aligned with former Brazilian President Bolsonaro, argues that President Trump’s first term was “excellent for Brazilian agriculture” as “Trump’s tariffs in that time favoured us.”
Brazilian President Luiz Inácio Lula da Silva recently visited Japan, hoping to open the Japanese market to Brazil’s beef exports. Japan currently buys 40% of its beef from the U.S., but facing the threat of tariffs, Tokyo may shift to South American suppliers. If implemented, this could mean lower costs for Japanese consumers and increased revenue for Brazilian ranchers.
Other Brazilian industries, such as coffee and footwear, may gain a competitive edge over their Asian counterparts in the U.S. market. Brazil is the world’s biggest producer of coffee, followed by Vietnam, Indonesia and Colombia. Trump initially levied tariffs of 46% on Vietnam and 32% on Indonesia. If those higher rates are reinstated in July it will make beans from those two countries significantly more expensive in the U.S. This would give both Brazilian and Colombian coffee a competitive advantage in the U.S., where they are already the main suppliers.
The Downside: Uncertainty and Global instability
Despite the potential for gains, South American nations face significant challenges stemming from the trade turmoil. As Juan Carlos hallak, professor of international economics at the University of Buenos Aires, points out raising “bilateral barriers” on commodities mostly just affects “who sells to whom”, and not financial gains for the sellers, as the prices are set globally.
Even the lower 10% tariff rate could dampen U.S. demand for South American goods, particularly those competing with domestic production, such as oil, soybeans, copper, iron ore, gold, and lithium.
Moreover, the U.S. has imposed a 25% tariff on steel and aluminum imports from all countries. Brazil is a producer of both metals and has large reserves of their raw materials – bauxite and iron ore. Meanwhile, Argentina has one of the largest aluminium producers in South America, listed company Aluar, and a smaller steel industry. Argentine producers warn they may both lose US access and face more Chinese imports, creating increased competition for domestic producers.”We’re worried by the diversion of what can no longer enter the U.S.,” said carlos Vaccaro, executive director of the Argentine Steel Chamber.
Commodity Price Volatility and Long-Term Concerns
Trump’s tariff wars have triggered volatility in global commodity prices, with oil and copper experiencing significant dips. Copper, a major export for Chile and Peru, hit a 17-month low in early April.
Eduardo Levy Yeyati,a former chief economist at the Central Bank of Argentina,warns that the impact on commodity prices and global demand presents a “serious headwind” for South America.
Looking ahead, Yeyati suggests that a substantial increase in South American exports to the U.S. could trigger even higher tariffs. After all, Trump’s aim is to boost domestic production, not imports from other countries. Trump may be equally displeased if South American nations start exporting more to China. “If Brazil fills in the U.S. quota of goods exports to China, the U.S. may choose to punish Brazil.”
Counterargument: The Benefit to U.S. Consumers
While the focus remains on the impact on South America,one could argue that these tariffs ultimately benefit U.S. consumers. By incentivizing domestic production, the U.S. aims to create jobs and strengthen its economy. However,many economists would dispute this,stating the higher cost of goods will be passed on to the consumer.
The road Ahead: Uncertainty Prevails
The future of South American trade under Trump’s tariff regime is uncertain. As Mr. Hallak says: “It’s very hard to predict where this is going.”
He envisions a future where the U.S.protects its manufacturing industries more than its agricultural goods. But adds, “I’m not sure Latin America is ready to take advantage of those opportunities. There will be specific opportunities without a doubt, but something that changes the game? I don’t think so.”
FAQ: Trump’s Trade Tariffs and South America
Q: What are the main trade tariffs imposed by President Trump?
A: The U.S. imposed a 145% tariff on Chinese goods. Canada and Mexico still got 25% tariffs on some exports to the U.S. The U.S. has also imposed a 25% tariff on steel and aluminum imports from all countries.
Q: How might South American countries benefit from these tariffs?
A: South American countries, particularly Brazil, may see increased demand for agricultural exports, such as soybeans and beef, as countries seek alternatives to U.S.goods.
Q: What are the risks for South America?
A: Risks include reduced U.S. demand due to higher prices, increased competition from Chinese imports, and volatility in global commodity prices.
Q: Could increased exports to the U.S. lead to higher tariffs for South American countries?
A: Yes, if South American exports to the U.S. increase significantly, the U.S. may impose higher tariffs to protect domestic industries.
Q: What does this mean for the average U.S. Citizen?
A: This will most like mean higher prices for some consumer goods, especially those that utilize steel or aluminum in their construction. Food prices could also experience an increase.
