Trump's new tariff threats are worse than ever for LatAm and other US policy comments - 14 July 2025

The sequel to Liberation Day is worse for Latin America.

I write about US policy in Latin America every Monday. In today’s newsletter:

1. The Trade War worsens (no paywall)

2. Tariffs on Brazil

3. Tariffs on Mexico

4. Mexico’s judicial reform

5. Yet another round of Rubio vs Grenell on Venezuela

6. Central America remittances are up

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As Trump hit the 90 day deadline last week, we now get to see how the new, new Trump trade environment plays out. It’s turning out poorly for Latin America. 50% tariffs on Brazil. 30% tariffs on Mexico. 50% tariffs on copper. 10% additional tariffs on any BRICS ally. More announcements are likely to be made this week, and no Latin American country appears close to a deal yet. The new tariff rates are scheduled to take effect on 1 August.

The July tariff announcements are far worse for Latin America than the ones in April. Back on 2 April, nearly the entire region surprisingly escaped high tariffs and settled for the 10% baseline. For Central American and South American countries with a free trade deal with the US, 10% was a treaty violation, but still relatively better than the absurdly high rates being imposed on China and other Asian economies. For Brazil and Argentina, protectionist economies without a US trade deal that send most of their exports to China, 10% was an unexplained gift and an enormous win. Then Trump backed down and paused all the tariffs at the 10% level. This was fine for South America but bad for Central America, which was now facing a relatively worse trade environment. But it was all temporary. As the new rates are being announced, this is the worst tariff level yet for Latin America. While I don’t think it will stick, it does suggest a bad direction for US trade policy with the region.

The new stated reasoning for the tariffs has been quite political. Brazil’s letter is a condemnation of how Bolsonaro has been treated. Mexico’s tariffs cite the failure to stop fentanyl and defeat the drug cartels. I expect additional tariff announcements, including those against Honduras, Colombia, and Chile, to include similar political attacks. Is this Trump’s actual logic for tariff rates or just a legal justification he needs to impose tariffs that will stick with the courts? Nobody can be certain, but the letters suggest that there is plenty of room for negotiation.

Key point: This is not over. I read a lot of analysis this weekend bemoaning the failure of Sheinbaum to get a better deal than 30% or criticizing Lula for his immediate hawkish position on the tariffs (not to mention Canada and Europe). I think the criticisms are too early. There are more than two weeks for the countries to negotiate and for Trump to back down before the tariffs take effect. Additionally, they can be reversed as quickly as they were imposed. I don’t know exactly where all the tariffs will land, but if policy flip-flops are the only constant, then it seems quite likely that the tariff rate each country faces in January 2026 will be different from the ones announced in July 2025. In fact, for most countries, the tariff rates will probably change more than once before the end of the year. There are many more rounds of this tariff narrative to come.

The good news is that they will change. The bad news is that they will still not be locked in. In many ways, the uncertainty is worse than the tariffs for trade and foreign investment.

For Brazil, coffee will prove more important than BRICS, Bolsonaro, or social media.