Could South America benefit from Trump’s trade tariffs?

Upon Donald Trump announcing trade tariffs affecting several countries, South American nations found relief.

Of the 12 states on the continent, 10 were fortunate to receive the minimum tariff of 10%.

Only Guyana and Venezuela were initially burdened with higher rates of 38% and 15% respectively, later amended to 10% after Trump opted to halt increased tariffs for 90 days.

China, facing a steep 145% tariff, along with Canada and Mexico, still contend with a 25% tariff on certain exports to the US.

Some analysts perceive this as beneficial for South America, arguing that heightened US tariffs on China, alongside Canada and Mexico, might render South American goods more appealing to US and global markets.

While this notion is valid, it may underestimate the extensive global trade unpredictability that also affects South America.

This discussion merits exploration, particularly the potential advantages for the region.

South America boasts a wealth of commodities, with major economies like Brazil and Argentina serving as key exporters of soybeans and petroleum, along with Brazil’s iron ore pivotal for steel manufacturing.

The US’s rigid tariffs on Chinese imports and China’s retaliatory tariffs of 125% on US goods could present favorable opportunities for South American exporters.

For instance, Brazil could enhance its agricultural exports to China, compensating for former US supplies. Currently, China remains Brazil’s primary export market, followed by the US.

History supports this; during Trump’s earlier term, China shifted some of its commodity purchases from the US to Brazil following similar tariff implementations, enhancing Brazilian soybean exports.

With the ongoing 2025 soybean harvest in Brazil, there is hope for a repeat occurrence.

Stakeholders like Frederico D’Avila, a farmer and former politician linked to ex-President Bolsonaro, share this sentiment. D’Avila, who has also been a notable figure at Aprosoja, a soybean producers’ association, expressed that Trump’s initial presidency was “favorable for Brazilian agriculture” as his tariffs benefited Brazilian farmers.

Conversely, Juan Carlos Hallak, an international economics professor at the University of Buenos Aires, presents a contrasting perspective. He argues that increased “bilateral barriers” primarily influence “who trades with whom” rather than improving financial gains for the sellers, as pricing is globally standardized.

Thus, Hallak proposes that South American nations shouldn’t anticipate greater financial returns from their commodities due to Trump’s actions, but rather a shift in clientele.

“Prices are influenced more by macroeconomic conditions… for instance, in the event of a recession,” he remarks to the BBC.

Nevertheless, various sectors in South America hope that Trump’s actions could facilitate increased global sales as nations lessen imports from the US.

Consider the Brazilian beef sector. President Luiz Inácio Lula da Silva recently visited Japan, seeking to penetrate the Japanese market for Brazil’s beef exports.

Currently, Japan sources 40% of its beef from the US. However, Trump’s earlier tariff threats of 24% could prompt Tokyo to consider acquiring more meat from South America.

Additionally, other Brazilian industries, like coffee and footwear, may gain a competitive advantage over their Asian rivals in the US market.

Brazil stands as the largest coffee producer globally, followed by Vietnam, Indonesia, and Colombia.

Trump initially imposed tariffs of 46% on Vietnam and 32% on Indonesia. Although these rates are temporarily halted, their reinstatement in July could render beans from these two nations considerably pricier in the US.

This would endow Brazilian and Colombian coffee with a competitive edge in the US market, already dominated by them.

Simultaneously, Brazil’s footwear manufacturers might observe an uptick in exports to the US due to Trump’s elevated tariffs on Chinese goods, as China is currently the leading footwear producer, with Brazil in fifth.

The remaining three leading footwear producers globally include India, Vietnam, and Indonesia, with the US initially imposing a higher tariff of 26% on India.

Meanwhile, Uruguay’s new President Yamandú Orsi has indicated that Trump’s tariffs are accelerating a trade agreement between the EU and South America’s Mercosur bloc.

He remarked that “Europe now has little choice but to lower its demands somewhat” in discussions as it looks to diversify trade partnerships.

It’s worth noting the frequent “coulds” and “ifs” highlighted. This is not only due to the preliminary stages but also because the rapid and sweeping US trade shifts are causing broader instability.

Assessing whether the potential benefits for South America outweigh possible downsides is complex, which leads me to the risks for the continent.

Firstly, a 10% tariff is still significant. Even those with the lower rates may see diminished US demand if prices surge. This risk is particularly relevant for imports that compete with US domestic production, including oil, soybeans, copper, iron ore, gold, and lithium.

Moreover, the US has instigated a 25% tariff on aluminium and steel imports across the board.

Brazil produces both metals and possesses large reserves of bauxite and iron ore, while Argentina hosts one of South America’s foremost aluminium manufacturers, Aluar, along with a smaller steel sector.

Argentine producers express concerns regarding potential losses in US market access alongside increased competition from Chinese imports.

Carlos Vaccaro, executive director of the Argentine Steel Chamber, conveyed worries to the Buenos Aires Herald regarding market diversions due to restricted US entry.

Trump’s tariff conflicts have also triggered worldwide commodity price fluctuations, with notable drops in oil and copper prices. In fact, copper fell to a 17-month low at the beginning of April. Such price volatility might adversely impact the economies of both Chile and Peru, where copper is their chief export.

Eduardo Levy Yeyati, a former chief economist at the Argentine Central Bank, remarks that commodity price shifts and a decline in global demand pose a considerable challenge for South America.

He further notes that should Brazil and Argentina witness a significant export increase to the US, it may trigger higher tariffs from Trump.

Trump’s objective remains to bolster domestic production rather than importing from abroad.

Yeyati also speculates that Trump might exert pressure on Latin America to curtail China’s influence in the region in exchange for favorable favors. China has invested billions in infrastructure projects throughout Central and South America.

Ultimately, labelling Trump’s tariffs as an unequivocal “win” or “loss” for South America oversimplifies a multifaceted situation. This is particularly true if Trump announces in July that all countries except China, Canada, and Mexico will retain the 10% tariff.

As Hallak aptly puts it: “It’s quite challenging to determine the trajectory of this.”

Subject to this nuance, he foresees a reality where the US provides more protection to its manufacturing sectors than to its agricultural exports.

Yet he concludes: “I am unsure whether Latin America is equipped to capitalize on such opportunities. There will undoubtedly be specific chances, but a game-changing shift? I do not believe so.”