Latin America is anxiously counting the days until Nov. 5, when U.S. voters will choose between continuity under Vice President Kamala Harris or a return to the policies that fueled volatility in the region's largest markets and economies under former President Donald Trump. .
Trade and tariffs, plus the effect of monetary policy on global interest rates, are perhaps the most important ways the election has shaken the US neighborhood. Washington's economic war with China could hurt Mexico in particular and discourage Brazil, especially in a retaliation scenario.
More broadly, a Trump victory could send shockwaves across the region, putting pressure on some currencies and central banks even as countries heavily tied to trade or goods with China emerge largely unscathed.
While the Biden administration has not reversed Trump's tariffs on China, Kamala's plan to keep Trump's on China intact has made him number one in the world. 2 makes a commitment to the economy. Under Trump, tariffs on Chinese goods could rise to around 60%.
China will also participate in negotiations to review the Trade Agreement between the United States, Mexico and Canada (USMCA), scheduled for 2026, since some products, including those from Chinese companies located in Mexico, can no longer be considered Mexican. The automotive industry's content requirements, known as “Appearance Rules,” will play a key role in these negotiations. A few weeks ago, Trump said he would impose tariffs of up to 200% on vehicles imported from Mexico.
“If Trump is president, the trade war (with China) will intensify, and I think the most affected country in Latin America will be Mexico,” said Carlos de Sousa, emerging markets strategist and portfolio manager at Wontopal Fixed Income. .
“If Trump wins, he will try to get this expiration rule (USMCA) into a solid negotiating position, possibly changing the rules of origin.”
He added that greater scrutiny of trade rules related to Mexico means that “we will return to a higher level of volatility than we have seen in the last five or six years, in terms of Mexican asset prices.”
In a recent note to clients, investment bank Lazard said a 10% global tariff like the one proposed by Trump could be used to prevent partners from evading tariffs with countries that already have trade agreements with the United States. Other examples of their use include policies related to immigration, as remittances greatly support many regional economies, particularly in Central America.
South American countries may be better positioned to resist the United States' stricter trade regimes. The investment bank places copper and lithium powerhouse Chile on a list of countries with strong exposure to the US market that are often avoided due to the less substitutable nature of their exports.
If Kamala Harris wins these calculations will be much lower.
“If Democratic candidate Kamala Harris wins, in a divided government, we expect a reduction in tariff risk and lower growth and investment conditions in the United States, which will lead to a steady improvement in US assets in emerging markets,” he said. the investment bank in its October outlook for emerging markets published last week.
While Mexico's industrial export economy may feel the consequences of a second Trump administration, other countries that are primarily commodity exporters may also benefit.
South America could benefit from reliance on American remittances and, in a Trump scenario, a 10% tax could be imposed if Trump's running mate, Senator JD Vance, goes ahead with his tax plan.
As trade tensions with Beijing escalated during the Trump administration in 2018, China replaced all of its U.S. soybean imports with Brazilian soybeans. China is already Brazil's largest trading partner and South America's largest economy will benefit even more from trade with China.
“As a result of the 'tit for tat' dynamic, there could be a tariff effect that would help Latin America if other suppliers, such as Brazil and Argentina, purchased primary products from the United States,” said Alejo Cervonco, CIO. From UBS Global Wealth Management to US emerging markets
“The rhetoric that tariff uncertainty only hurts Latin America may be too simplistic.”
