The Trade War Between the United States and China: Latin America's Role

 By Javier Surasky

The trade war between the United States and China is now in full swing. U.S. tariffs ranging from 10% on general imports to a staggering 145% on Chinese products have been met with equally harsh Chinese retaliation—tariffs of up to 125% on American goods entering China.

In this clash of economic titans, Latin America finds itself caught in the middle, with strong commercial ties to both powers:

According to 2022 official data:

• ECLAC reports that trade between Latin America and the Caribbean with the United States is growing at a slower pace than with China. While the U.S. remains the region's dominant trading partner, trade with China has experienced remarkable growth—multiplying 35-fold between 2000 and 2022.

• In terms of investment, the United States still dominates, accounting for 70-80% of foreign direct investment (FDI) in Latin America and the Caribbean between 2000 and 2020, compared to China's more modest 5.74%.

This scenario creates both challenges and opportunities for Latin America in navigating the commercial tensions between these superpowers.

The northern parts of Latin America are well-positioned to benefit from nearshoring as companies seek alternatives to Chinese manufacturing for the U.S. market. Meanwhile, countries like Brazil—with its diversified economy and massive domestic market—along with resource-rich nations such as Argentina, Bolivia, and Chile are attracting interest for their abundant raw materials, which both the U.S. and China need to advance their green and digital technologies. However, volatile international commodity prices amid global economic uncertainty make it difficult for exporters to secure stable advantages in this shifting landscape.

This highlights the precarious position Latin America occupies in attracting sustained attention from both superpowers.

• Despite controlling nearly half the world's lithium reserves (Chile and Bolivia) and leading in copper (Peru and Chile), Latin America's inadequate infrastructure and weak environmental regulations limit its ability to leverage these resources effectively. Instead of fostering sustainable development, the region risks reinforcing patterns of export dependency that perpetuate economic vulnerability.

• Logistical shortcomings and political instability across various Latin American countries further hamper the nearshoring potential of the region.

• The regional market itself—home to over 650 million people with a substantial middle class—continues to struggle with deep-rooted inequality and economic informality affecting half the workforce. These structural issues, compounded by inconsistent social inclusion policies, severely restrict Latin America's ability to act cohesively.

• While innovation hubs exist, exemplified by Costa Rica and Uruguay's thriving tech ecosystems, and initiatives like MercadoLibre's integration of AI into its e-commerce logistics, widespread talent gaps in STEM fields and chronically low R&D investment (averaging just 0.6% of GDP) constrain opportunities. This raises concerns about technological sovereignty as noted in recent UNESCO assessments (2025).

Yet the U.S.-China rivalry itself is creating notable opportunities:

• The automotive sector has seen Chinese companies like BYD significantly expand their Brazilian operations, with electric vehicle sales jumping 84% in 2024.

• China is increasingly looking to Latin America for partnerships as the U.S. tightens restrictions on advanced chips and AI software. Huawei, for instance, has substantially expanded its regional activities and investments.

With this context in mind, let's consider a brief SWOT analysis for Latin America's potential alignment with either superpower:

U.S. Alignment Scenario

Strengths:

• Geographic proximity, especially beneficial for northern Latin American countries
• Strategic mineral reserves (lithium, copper) highly valued by U.S. industries
• Cultural affinity and established trade agreement frameworks

Weaknesses:

• Persistent dependence on raw material exports
• Underdeveloped logistics infrastructure
• Over-reliance on the U.S. market
• Significant STEM skills shortage
• Declining U.S. international cooperation programs

Opportunities:

• Potential investment influx in renewable energy and advanced manufacturing
• Digital transformation supported by leading U.S. tech firms
• Access to sophisticated private investment networks

Threats:

• Increasingly protectionist U.S. trade policies
• Potential loss of Chinese export markets
• Risk of unwanted entanglement in broader military alignments
• Lingering public perception of U.S. as "imperialistic"

China Alignment Scenario

Strengths:

• Critical mineral resources essential to Chinese industrial strategy
• Rapidly expanding trade relationships
• Developing tech ecosystems that could benefit from Chinese expertise

Weaknesses:

• Continued raw material export dependence
• Poor logistics infrastructure
• STEM talent shortages
• Cultural and linguistic barriers

Opportunities:

• Substantial Chinese investment in infrastructure development
• Collaborative AI development opportunities with Chinese firms
• More favorable technology transfer arrangements through international cooperation

Threats:

• Potential U.S. economic retaliation
• Growing concerns about digital sovereignty
• Risk of unsustainable debt from Chinese-financed projects

Is non-alignment a viable option? In theory, this approach would allow Latin America to diversify its relationships and maximize economic, social, and environmental benefits. However, effective non-alignment would require unified regional diplomatic and political coordination, which currently seems unattainable despite being essential for such a strategy.

Successful regional cooperation would need to focus on shared interests that benefit from supranational coordination, such as developing commercial and digital infrastructure and establishing harmonized regulatory frameworks and investment incentives across countries.

Ultimately, while the U.S.-China trade war presents Latin America with potential opportunities due to its strategic position between the competing powers, the region's internal divisions and structural limitations create significant challenges in the geopolitical waters that Latin America must navigate in the coming years.