Economy
Is Donald Trump’s Tariff-and-Threat Diplomacy Towards Latin America Throwing the Region into China’s orbit? Part 2
China’s expanding economic and geopolitical influence in Latin America has become a significant challenge to the U.S.’s traditional dominance in the region.
The U.S.’s tariff-and-threat diplomacy, particularly what Trump promise for his second administration, pushed some Latin American countries away, as they sought to avoid economic and political isolation. With China offering trade deals without the same political strings attached, this shift towards Chinese influence is likely to continue, particularly as the U.S. focuses on its internal issues and competition with China.
However, this trend also raises questions about the long-term impacts on Latin American sovereignty, economic stability, and geopolitical positioning, as China’s increasing presence in the region could come with its own set of challenges and dependencies. The region might find itself balancing its relationships with both powers, but the pace of this shift appears to be accelerating as Latin American countries seek to maximize their economic opportunities in a multipolar world.
The China Factor: Why It Makes Trump Nervous
According to a Brazilian study, China’s strategy of combining economic pragmatism with diplomatic engagement resonates with many Latin American nations dealing with developmental challenges and infrastructure deficits. Unlike the U.S., which often attaches economic orientation and political conditions to its aid and investments, China offers relatively unconditional financial support, making it an appealing partner and consolidating cooperation under the “South-South” label. As a result, countries like Brazil and Peru are increasingly pivoting towards Beijing, gradually eroding the U.S.’s traditional hegemony in the region. Furthermore, China is the number one trade partner for Brazil, Chile, Peru, and Uruguay, and second only to Brazil in Argentina, both in trade and foreign investments.
Trump, on the other hand, risks further alienating Latin America with his confrontational stance. In stark contrast, China’s focus on infrastructure and socio-economic development fosters goodwill and strengthens its geopolitical presence. Projects such as Chancay Port in Peru and regional integration programmes highlight China’s ability to provide substantial financial and infrastructural support, offering Latin American nations alternatives to U.S. dominance.
Trump’s transition team reportedly considered imposing a 60% tariff on transactions via Chancay Port—a move that reflects U.S. concerns over losing economic leverage. Furthermore, Trump has also threatened BRICS nations with sanctions for reducing reliance on the U.S. dollar, a shift that is already underway.
Trump continues to rely on imperialistic, stick rhetoric, which is increasingly unpalatable to the region, while Xi Jinping speaks the language of partnership and shared development. China’s seems to be winning the battle for the hearts and minds of Latin American leaders.
Brazil: Outside the BRI but China’s Top Investment Hub in America’s ‘Backyard’
Chinese investments in Brazil are surging, making it the top destination for Chinese capital in Latin America despite Brazil not formally being part of the Belt and Road Initiative (BRI). China has been Brazil’s number one trade partner for the last 15 years.
In 2023, 72% of these investments targeted renewable energy and sustainability projects, highlighting a strong focus on green initiatives. Additionally, Chinese companies like the China National Offshore Oil Corporation (CNOOC) have solidified their presence in Brazil’s oil and gas sector, actively participating in exploration and production.
In the automotive sector, Chinese electric vehicle (EV) manufacturers are expanding into Brazil. BYD, the world leader in EV, for instance, has taken over Ford’s former plant in Camaçari, in the state of Bahia, transforming it into a hub for electric and hybrid vehicle production.
These investments underline China’s strategic economic partnership with Brazil, spanning energy, sustainability, and resource extraction.
This shift poses a significant challenge to Trump’s new administration, which will have to find a balance between maintaining U.S. influence in its “backyard” and countering China’s rising appeal. The U.S. risks losing ground in the region if it fails to engage constructively with Latin America, particularly in the face of China’s expanding footprint. While Mexico continues to rely on the U.S. for over 80% of its exports, the country is increasingly weighing the benefits of diversifying its economic relationships.
Mexico: Close to the U.S., Irresistible to China
Chinese investments in Mexico have skyrocketed in recent years, particularly in the manufacturing sector, to gain duty-free access to the U.S. and Canadian markets. Key areas of investment include:
In the automotive manufacturing, BYD Auto is expanding its presence in Mexico. The company plans to establish a new assembly line to produce EVs for both the Mexican and U.S. markets. MG Motor, has too, announced plans to build a manufacturing plant and research and development center in the country. This initiative aims to produce vehicles tailored for the Latin American market.
In the electronics and home appliances segment, Hisense in 2021 invested $260 million in a manufacturing plant at the Hofusan Industrial Park near Monterrey. This facility focuses on producing refrigerators and other home appliances for the North American market.
For its turn, Lenovo has established a “mega site” in Mexico dedicated to the assembly of computers, servers, and computer racks, enhancing its manufacturing capabilities in the region.
In the construction equipment segment, Lingong Machinery Group (LGMG) is investing $5 billion to build a plant and industrial park in northern Mexico. This facility will produce heavy construction equipment.
The Hofusan Industrial Park, located near Monterrey, hosts several Chinese companies, with investments that have totaled approximately $1 billion, with plans to expand further in the coming years.
These investments are strategically positioned in northern Mexican states such as Nuevo León, Chihuahua, and Sonora, leveraging proximity to the U.S. market and benefiting from trade agreements like the United States-Mexico-Canada Agreement (USMCA). The intent of these Chinese companies is to mitigate tariffs and enhance access to North American markets.
Will the old Monroe Doctrine last?
Latin American leaders are also mindful of the enduring legacy of the Monroe Doctrine, which has historically – since 1832 – justified U.S. interference in regional political matters, backing several dictatorial coups. However, the region is now confronting a more complex geopolitical reality, where China’s economic presence is hard to ignore. Under the Trump administration, it is expected that a stronger stance will be taken against China’s growing influence in the region, especially in Mexico.
Yet, the promises of the new administration has focused so far on populism, isolationism, and a more transactional approach to international relations. Countries like Cuba, Venezuela, and Nicaragua will likely remain on Trump’s radar as unfriendly nations, but in other parts of Latin America, right-wing groups, which are in opposition to present left governments in Brazil, Bolivia, Chile, and Colombia have high hopes that Trump’s new administration will support their political aspirations—especially in the lead-up to key elections.
In sum, Trump’s new administration will likely result in a tougher, more unilateral approach to migration, trade, and diplomacy. While business leaders like Elon Musk, Trump’s close adviser, may temper some of these moves, the general direction points to a U.S. foreign policy that is unpredictable, confrontational and focused on protecting U.S. interests above all else. Ultimately, Trump’s message remains clear: countries do not have permanent allies, only shifting interests.
Ricardo Martins ‒PhD in Sociology, specializing in policies, European and world politics and geopolitics
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