Economy
Is Donald Trump’s Tariff-and-Threat Diplomacy Towards Latin America Throwing the Region into China’s orbit? Part 1
Even before his inauguration, President-elect Donald Trump has been threatening neighbouring countries with tariffs and sanctions, straining relations and pushing Latin American nations closer to China.
It seems that unpredictability is a brand for the new, re-elected U.S. president. However, there are some recurring patterns, such as the use of tariffs and threats as diplomatic tools and appointments based on loyalty above all else. After facing setbacks in his first term, Trump seems to have elevated loyalty to the top of his checklist for appointees, often at the expense of competence.
Foreign Policy and Trade: Isolationist and “America First”
Donald Trump’s latest appointments signal a clear shift in U.S. foreign policy towards a more isolationist and transactional approach, particularly regarding Latin America. Mike Waltz as national security adviser brings a defense-oriented perspective with pragmatic isolationism, Marco Rubio as Secretary of State introduces a hawkish stance aimed at countering China’s influence and addressing perceived leftist shifts in the region, and Elise Stefanik as UN ambassador suggests a diminished emphasis on multilateral diplomacy in favor of direct, transactional relationships.
These choices point to policies that prioritize U.S. interests over broader engagement, with Latin America likely facing targeted sanctions or interventions, particularly against nations perceived as aligning with China or adopting leftist policies. Countries like Venezuela, Cuba, and Nicaragua will see increased pressure, while nations with strong economic ties to China, such as Brazil, Peru and Argentina, might encounter challenges balancing their relationships with both powers.
Brazil’s decision not to officially join China’s Belt and Road Initiative, yet signing 37 important agreements and projects during Xi Jinping’s recent visit, is seen as a cautious move to avoid provoking Trump’s new administration.
Despite Argentine President Milei’s ultra-liberal rhetoric and personal ties to Trump and Musk, Argentina remains a key recipient of significant Chinese investments. These include hydropower projects like the Kirchner-Cepernic dams, agricultural trade in soybeans and meat, and financing for rail and transportation infrastructure.
On trade and economic policy, the selection of Robert Lighthizer—a staunch advocate of tariffs and renegotiated trade deals under the “America First” framework—signals a turn towards protectionism. This includes expanding tariffs or new trade barriers targeting China and pressuring Latin American allies for trade deals more favourable to U.S. industries.
For Latin America, the implications are significant. Countries heavily dependent on trade with the U.S., such as Mexico, Guatemala, and Honduras, are particularly vulnerable. Mexico, which sends approximately 85% of its exports to the U.S., would be among the hardest hit by proposed tariffs. Potential retaliation from Mexico could strain relations further, especially in light of trade diversion concerns, such as China allegedly using Mexico as a route to bypass U.S. tariffs. Despite the U.S.-Mexico-Canada Agreement (USMCA), the broader trajectory of U.S. policy under Trump suggests heightened tensions and economic uncertainty for the region.
Tariffs and Tensions: Mexico Stands Firm Against Trump’s Threats
Donald Trump has accused Mexico of allowing “thousands of people” to pour into the U.S., allegedly bringing “crime and drugs at levels never seen before.” He specifically singled out fentanyl, claiming Mexico is responsible for its entry into the U.S.
To escalate matters, Trump threatened to impose tariffs on Mexican goods – a clear violation of their free trade agreement – to pressure the country into stricter migration and drug control measures. Additionally, he floated the idea of taxing remittances sent from the U.S. to Mexico, a significant economic lifeline for many Mexican families. As if that were not enough, Trump suggested designating Mexican cartels as terrorist organizations, a move that could pave the way for military or unilateral U.S. actions against them.
In response, Mexico’s President Claudia Sheinbaum firmly warned that her country would impose retaliatory tariffs on U.S. goods, potentially sparking a cycle of economic risks for both nations. She also highlighted the U.S.’s role in fueling violence in Mexico, pointing out that many of the guns used by Mexican gangs originate from the U.S. Moreover, Sheinbaum noted that the demand for synthetic drugs like fentanyl primarily comes from the U.S., exacerbating crime and violence south of the border.
Sheinbaum didn’t stop there. She criticised U.S. spending priorities, suggesting that reallocating a fraction of its war budget toward addressing the root causes of migration and development in Mexico could yield more sustainable results. Advocating for dialogue over confrontation, she intended to send a letter to Trump urging cooperation between the two countries.
Implications for U.S.-Mexico Relations
With such a heated start, one wonders about the implications for U.S.-Mexico relations under Trump’s second administration. The early exchange of accusations and threats has set an aggressive tone, making a bumpy bilateral relationship almost inevitable. A potential tariff war could disrupt trade, harming businesses and the Mexican economy that heavily rely on cross-border commerce.
Geopolitically, Mexico’s newfound confidence, buoyed by support from China, reflects a shift in its approach to U.S. pressure. This shift could introduce new dynamics in North American relations, challenging long-standing power balances. Meanwhile, Sheinbaum’s assertive and articulate response underscores Mexico’s refusal to capitulate to U.S. threats, signalling a stronger defence of its sovereignty and policies. This assertive reaction was not seen from the Canadian or the European sides.
Ultimately, Trump’s aggressive rhetoric and Sheinbaum’s resolute stance highlight deeper structural issues, such as U.S. drug demand and arms trafficking to Mexico. Addressing these challenges will require cooperative solutions rather than unilateral actions. However, the involvement of external powers like China adds further complexity, making the path forward fraught with challenges for both nations and Latin America as a whole.
In the second part of this article, I will examine China’s place in Trump’s tariff-and-threat diplomacy towards Latin America.
Ricardo Martins ‒PhD in Sociology, specializing in policies, European and world politics and geopolitics
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