Trump wants Latin America to be actively anti-China
It's not enough to appeal to logic in this trade war. Latin America needs to show some anti-China vibes.
The US can compete more effectively against China by cooperating with other countries in the hemisphere. That is my belief and I would venture a guess that most of this newsletter’s readers agree with it to some extent.
The New York Times published an article over the weekend (go read the whole thing) that provides a useful framing for one of the big questions about the upcoming Trump term:
As the Trump administration vows an expanded trade war, businesses in Mexico are continuing with factory expansions. They assume their country remains central to the most fervent American aim: reducing dependence on factories in China. Many Mexican business leaders assert that their companies are positioned to thrive during another Trump administration. So long as he proceeds with his promise to increase tariffs on Chinese imports, that will amplify the need for alternative places to manufacture goods.
There are US and Mexican companies that are making a bold bet on Mexico despite threats of a blanket 25% tariff on everything, even higher tariffs on autos and other sectors with Chinese suppliers, and a potential military surge against drug cartels.
Unfortunately, the question is not whether you agree with the statement that it would be good to embrace North American supply chains to compete against China. The question is whether you believe the Trump administration shares that logic.
However, if Trump does engage with a trade war with Mexico, the reason is not that Trump hates Mexico more than China. It’s that he and his advisors believe in some way that China has gained a firm foothold in Mexico that is worth pushing back on with tariffs. A great article in the Financial Times earlier this month discusses how much Chinese investment has entered Mexico. To get inside the mindset of the Trump advisors who want a trade war with Mexico, you have to think about it from the standpoint of that trade war being somehow useful in blocking Chinese-made products from the US and/or pressuring Mexico to push back on the increasing Chinese investment in the country.
This position can be expanded throughout much of the hemisphere. Post-election, even as the domestic discussion is focused on an upcoming deportation surge, Trump’s coercion-first strategy and rhetoric towards Latin America has been more about countering China than countering migration. His comments about Panama and the canal were framed around China’s influence in that country. Mauricio Claver-Carone’s comments about Peru’s Chancay port included a threat to place tariffs on all goods that move through Chinese-controlled ports anywhere in the hemisphere. Behind the scenes, the Trump team is looking at China’s manufacturing of autos in Brazil, Chinese loans to Argentina and Chinese investments in critical minerals including copper mines around the hemisphere.
Leaders across Latin America have attempted to respond with logic and facts. Sheinbaum and Mexican state-level officials are highlighting the statistics about how small the percentage of Chinese investment is in the country. Mulino discussed Panama’s control of the Canal and the minimal influence of China.
While their responses may be technically accurate, in this case, Latin America is not reading the mood correctly in Washington. Trump and his team (and to some extent, this is a bipartisan mood in Washington) don’t want Latin America to deny that China is present. They want Latin America to acknowledge China’s growing role, openly discuss the problems with China, and then explain what Latin American countries are doing to fight back. They want Latin America to choose a side in the US vs China battle, not underplay the role of China in the hemisphere. Trump wants them to take an active stance against China.
An anti-China stance might be a step too far for most Latin American countries, particularly those in South America that need Chinese buyers of commodities. But Mexico may be well-positioned for this. Sheinbaum and her team are placing additional steel tariffs on China, and seizing Chinese products at ports that are being dumped at below-market prices. Many Mexican businesses agree with the fact China is not buying enough Mexican products and the cheap imports harm their country’s economy more than help it. Sheinbaum’s renewed war on drugs is going to target those fentanyl precursors in a way her predecessor never did. While Mexico’s president wants and needs some Chinese investment in manufacturing, there are definitely anti-China cards for Mexico to play that may placate Trump and reduce the threat of a trade war. That is a sign to look for in the coming weeks.
Looking forward:
Are there other countries or leaders willing to take the anti-China stance that Trump and his team seem to demand?
How does Beijing respond?