Is South America Poised to Ride the Wave of Trump's Trade Tariffs?

Donald Trump’s announcement of trade tariffs stirred mixed reactions across South America, with many nations relieved to find themselves on the lower end of the tariff spectrum. Most countries, except Guyana and Venezuela, initially faced a 10% tariff, while China suffered a significant 145% penalty. This shift in global trade dynamics raises the question: can South America capitalize on these tariffs?

Key Industries: South America is rich in commodities like soybeans, petroleum, and iron ore. The tariffs on China might lead to increased demand for South American exports, particularly Brazilian agriculture, which historically benefited when China redirected its purchases to Brazil during Trump’s previous term. Brazilian farmers express optimism about increased exports, especially following the 2025 soybean harvest.

But there’s a flip side: some experts argue that while the tariff changes could alter buyers, they likely won’t substantially increase profits for South American sellers. Prices are broadly influenced by macroeconomic factors rather than just export dynamics. Other sectors in Brazil, such as beef, coffee, and footwear, also hope to gain from reduced competition from the US, especially if Asian manufacturers face renewed tariffs.

Risks Abound: South America must navigate the risks that come with trade volatility. Countries could see reduced US demand for their exports if prices soar, impacting iron ore, aluminium, and copper. Moreover, the tariff wars have already led to considerable price instability in global commodities, affecting major exporters like Chile and Peru.

Political Considerations:

Some leaders, such as Uruguay’s President, see potential advantages towards finalizing trade agreements, specifically with the EU’s Mercosur bloc. However, the overarching sentiment remains cautious; the unpredictability surrounding trade changes makes it hard for South American nations to strategize effectively.

In conclusion, while South America might be positioned to benefit from Trump’s trade tariffs, the variable outcomes and significant risks present a complex trade landscape that makes it challenging to predict the future. Will the potential upsides outweigh the lurking challenges? Only time will tell.