Donald Trump is pulling his neighbors to the center of his trade war with China, while seeking to push the Asian giant from a region that the US has always considered its backyard.
Last week, the president sent the Secretary of Defense Pete Hegseth to Panama as part of his continuous effort to reaffirm American rule over the channel.
This Monday (14), he received a nearby ally in the White House, while the Treasury Secretary Scott Bessent visited Buenos Aires and reiterated the US desire that Argentina terminates its dependence on Chinese financing.
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It is a diplomatic offensive designed to contain China’s growing influence in Latin America, where it has become one of the main financiers, one of the largest trading partners and an increasingly uncomfortable spine for Washington.
“What we are trying to prevent it from happening is what happened on the African continent,” Bessent said in an interview with Bloomberg Television in Buenos Aires on Monday. “China has signed a series of predatory agreements disguised as aid, in which it has acquired mineral rights and added huge amounts of debt to the balance sheets of these countries.”
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“They are ensuring that future generations will be poorer and without resources, and we don’t want this to happen more than it has happened in Latin America,” he added.
The intensified battle between the two largest economies in the world has left Mexico governments to Argentina dealing with the reality that their days of doing big business with Beijing without facing serious Washington reprisals are numbered, a change that threatens them to choose one side.
“It will probably be a more rugged path forward than it was in the last two decades,” said Matias Spektor, professor of international relations at the Getulio Vargas Foundation in São Paulo.
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The History of China in South America
China established a base in America at the beginning of this century, consuming raw materials from Rica in South America resources and injecting so much money back into the region that replaced the US as the continent’s main commercial partner. It also spread influence through the initiative of the belt and route, its main economic development program, to which more than a dozen Latin American nations joined.
He continued to advance despite Trump’s hard speech during his previous presidency, with Chinese companies taking mega-projects like the Metro in the capital of Colombia, Bogota, and the now completed Porto de Chancay, Peru.
Beijing also gained hearts and minds by distributing medical help and supplies when Latin America was being devastated by Covid-19.
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TRUMP CONTRA ATACA
This time, Trump showed little interest in trying to match China’s economic engagement. Instead, it has criticized apparent economic dangers of Chinese vehicles in Mexico and its operations on the Panama Canal. He even threatens to “resume” the navigable road that the US built more than a century ago.
He has taken action since returning to office that could put China’s presence at risk. The US has announced “secondary tariffs” about countries that buy Oil of Venezuela – the largest buyer is China. And a group of investors led by Blackrock said last month that he would buy ports at both ends of the Panama channel controlled by CK Hutchison, a Hong Kong conglomerate.
But it is a risky strategy in a region where China still bets on a more friendly approach. Chinese leader Xi Jinping introduced his country as champion of economic globalization during domes in Peru and Brazil last year. And although Beijing seeks to postpone the sale of ports in Panama, it is unlikely to try to intimidate his neighbors, said Michael Hirson, China’s head of analysis at the 22v Research in New York.
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“China will respond with carrots,” said Hirson, who served as the main representative of the Treasury Department with China under President Barack Obama. “They have been skilled at managing political changes here, even while Brazil and Argentina oscillate between left and right -wing governments.”
Washington, on the other hand, seems to be wearing just sticks. Bessent said he expects Argentina to pay its $ 18 billion swap line with China, but said there are currently no negotiations for any US Treasury credit line.
The US provided about $ 2.5 billion in foreign assistance to the Latin American nations in the 2024 fiscal year, according to government data. But the future of such help is uncertain due to Trump’s efforts to dismantle the United States agency for international development, a movement that risks harming US efforts in Latin America and elsewhere.
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“Latin America will not see the US operating with the complete set of tools needed to really compete,” said Hirson.
The success of Trump’s pressure campaign will probably depend on how much each country depends on US economic power and can result in a division between those closest to its borders and the southernmost, said Christopher Garman, managing director of the Eurasia Group political risk consultancy.
Mexico, Central America and, to a lesser extent, Colombia-the nearest South American ally in Washington-are “married to the US economy. They have nine children, there is no divorce,” Garman said.
The largest nations in South America, however, will probably prove to be harder to influence. Trade between Brazil and China has grown constantly both under current President Luiz Inacio Lula da Silva and his predecessor, Jair Bolsonaro, who never fulfilled the promises of breaking with the policy of previous governments to be “friendly with communist regimes.”
Commercial flows totaled about $ 178 billion last year, almost double the value with the US. And in the wake of Trump tariff ads, China immediately started increasing its Brazilian soybean purchases last week.
Argentine president Javier Milei, who has positioned himself as the most sympathetic leader to Trump on the continent, has also adopted a more friendly tone for China since taking office. Milei, who called China a “killer” during the campaign, labeled her as a “great commercial partner” and promised to “deepen the business relationship” between the two nations in an interview in January.
The libertarian sought to strengthen ties with the US and Trump, even proposing a free trade agreement between the two nations. But China is currently the second largest commercial partner of Argentina, behind only Brazil, and Milei’s pragmatism probably reflects its perception that it cannot completely turn its back to Beijing.
“Malei fetching a free trade agreement with a country that is becoming more protectionist is like hitting the head against the wall,” said Jimena Zuniga, Latin America’s Geoconomy Analyst at Bloomberg Economics. “He knows he needs to diversify.”
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