Countries throughout Latin America and the Caribbean, regardless of whether their relationship with the United States is good, bad or indifferent, have one thing in common when they look north: uncertainty.
Nobody can really be sure what US President Donald Trump’s trade policy could mean for them if it were fully applied. All countries are grappling with the prospect of a blanket 10% tariff on goods, which was announced April 2 but delayed until July 8, while several countries are already contending with specific tariffs. These include a 25% levy on vehicles and 50% on aluminum and steel, which also applies to a growing list of derivatives, such as household appliances.
All governments are expecting some kind of hit, but they are also hoping that when the dust settles Latin America and the Caribbean could fare better than other regions because of their proximity to the United States and the existing institutional integration through established free-trade agreements.
The United States has become a source of uncertainty and that is terrible for business
Gilberto García-Vásquez, Datawheel
“What is going on with trade policy in the United States is quite disruptive. The United States has become a source of uncertainty and that is terrible for business,” says Gilberto García-Vásquez, chief economist at Datawheel, a Cambridge, Massachusetts-based economic analysis firm.
Elijah Oliveros-Rosen, chief economist for emerging markets at S&P Global Ratings, has a similar take on the tariff policy.
“The biggest impact to the region with these changing trade policies from the United States is the uncertainty they are creating,” he says. “Not knowing the rules of the game will stop investment and this will have a toll on Latin America.”
LESS COMPETITIVE
Valeria Csukasi, Uruguay’s deputy minister of foreign affairs and point person on trade, says companies exporting to the United States know that a 10% tariff will increase the cost of goods, but they are hoping that it will not be prohibitive for consumers in the US market.
“It is too early to know the full impact of these decisions on the US market or if other markets will become more attractive products,” she says.
The United States is Uruguay’s fourth-largest export destination but the top spot for its emblematic export: beef. In May, the United States accounted for 32% of Uruguay’s beef export revenue. Uruguay’s overall export revenue was $1 billion in April, up 4% from a year earlier. It is in line for Trump’s 10% reciprocal tariff.
The biggest impacts will come from specific tariffs. This will apply to a handful of countries, principally Brazil and Mexico, but several others are also in the crosshairs. Trinidad and Tobago is one. It exports iron reductions to the United States. While the amount is much smaller than what the big economies ship, it plays a much greater role as a percentage of Trinidad’s economy. Iron reductions accounted for $617 million in exports in 2023, Trinidad’s fifth-largest export. Of that, $593 million went to the United States.
Gary Hufbauer, a nonresident senior fellow at the Washington, DC-based Peterson Institute for International Economics, calls the steel tariff “a catastrophe.” He says it is not based on economic analysis but ideas cooked up by Trump’s advisors.
The real impact, he adds, would be on the value chain in the automotive and household appliance sectors. Mexico is a top supplier of appliances to the United States. Nearly 40% of the refrigerators imported to the United States last year were made in Mexico. A new 50% tariff on 11 steel derivatives, including refrigerators, began in June.
“This is going to hurt industry, investors and consumers,” Hufbauer says. “It is part of a landmark change that I think will be much to the disadvantage of the United States in the long run, which is unfortunate.”
In addition to the steel components, most of the appliances and vehicles include inputs from China. This could create additional problems if the US-China dispute were to deepen. The issue of inputs from China will also be high on the list of issues when Canada, Mexico and the United States sit down to start a review of their free-trade agreement, the USMCA, on July 1, 2026. Domestic consultations are already afoot.
Oliveros-Rosen says he expects a tightening of the rules of origin in the negotiations, similar to when the USMCA was created in 2020 and local content in the auto sector went up to 75% from the 62.5% of its predecessor, the 1994 North American Free Trade Agreement.
“They can tighten inputs again,” Oliveros-Rosen says. “The impact on the Mexican economy will be how quickly they can shift production for some of these goods. There will be an adjustment period, which could create bottlenecks.”
This is going to hurt industry, investors and consumers
Gary Hufbauer, Peterson Institute for International Economics
A RED FLAG
Hufbauer says that a potential tariff on copper, which the administration is considering, might be even more dangerous. He says he expects Trump to receive a report recommending tariffs that will be based on the same debunked ideas behind the steel tariffs.
“Copper is ubiquitous today and the United States cannot produce what it needs. The impact would be tremendous,” he says.
Three Latin American countries accounted for 80% of the refined copper imported by the United States in 2024, with Chile at 65%, Mexico at 9% and Peru at 6%. Copper is the largest export commodity of Chile and Peru, representing more than half of their export earnings, while in Mexico it is closer around 2%.
GRACE AND TACT
The copper-rich countries, like most countries in the region, have sent trade missions to the United States. They want off the 10% list. No country in the region has retaliated, even if they have talked about it. Mexico, undoubtedly the most affected because of its integration with the United States, has not adopted retaliatory tariffs, and its president, Claudia Sheinbaum, has focused on the relationship with Washington, not the Trump administration.
“Mexico’s negotiation with Trump has been very calm,” says García-Vásquez. “The president has been level-headed and respectful of the relationship, keeping the discussion institutional.”
In addition to the aluminum steel tariffs, Mexico faces a 25% levy on goods not covered under the USMCA, including vehicles that don’t meet the rules of origin criteria for that sector. Mexico’s exports to the United States were $41.7 billion in April, down 2.7% on the year.
While Brazil has been more aggressive, even its stance has been somewhat muted. Oliveros-Rosen says Brazil is being cautious for a number of reasons, even if the United States is not its top export market.
“Brazil wants to be able to continue exporting to the United States and have access to US capital markets. It wants to keep a balance,” he says.
China represents 27% of Brazil’s export revenue, while the United State is at 11%. Brazil, however, has a trade deficit with the United States, which could also help it with Trump. Total exports in April were $30.4 billion, up 0.3% from the same month in 2024.
Peru, on the other hand, is actively looking to strengthen alternative markets, which could help its economy even if the US trade policy does not hurt its exports. China is already Peru’s largest trading partner, with four minerals accounting for nearly 80% of its total exports. Peru’s top export to the United States is blueberries, and companies are working to increase blueberry exports to China in case the US market softens. Peru’s total exports in April were $6.4 billion, up a whopping 28.2% year on year.
Oliveros-Rosen says this strategy could stem from a misreading of the market.
“The good news for some of the products is that there are no substitutes in the United States and the United States can only produce so many blueberries or grapes at a certain time,” he says. “The impact on commodities that are hard to substitute, even with the 10% tariff, will not be huge.”
Even so, García-Vásquez says there is a chance that the region, particularly Mexico, could actually benefit in the long run as tariffs reshape global trading patterns. Mexico saw a boost in trade during Trump’s initial period from 2017 to 2021, with Mexico filling gaps left by China, and that could happen again.
A COMPETITIVE BOOST
“While it might seem counterintuitive today, I think the US-Mexico integration is going to increase and the relationship will grow stronger,” he says.
For Brazil, it is the gap left by the United States in the Chinese market. Brazil’s agriculture exports to China surged during Trump’s first term and evidence points to a repeat.
“More agricultural goods from Brazil will go to China, filling in for what would have come from the United States,” says Oliveros-Rosen.
In the end, he says that Latin America and the Caribbean could be hit less than other regions in the world, like emerging Asia, as those markets have a larger share of exports going to the United States.
“The region may be a winner if tariffs are focused aggressively outside of Latin America,” Oliveros-Rosen says. “Relative competitiveness may increase compared to the rest of the world, but the tariffs, in the end, are not good for anyone.” LF