China’s trade dominance in South America tempers Trump’s influence

BUENOS AIRES - Argentina’s libertarian President Javier Milei came to office in late 2023 slamming China as a communist “assassin” and threatening to weaken ties with the Asian nation.

Instead, exports to China including soya and lithium jumped 15 per cent in his first year.

The pragmatic U-turn by a natural US ally underscores a challenge for President Donald Trump in resource-rich South America, where booming commerce in recent years has boosted China’s influence.

Mr Trump is looking to shake up global trade

and get partners to promote US interests using threats and trade tariffs. He has already pushed for concessions from Colombia, Panama and Mexico while Brazil is in the crosshairs of new trade tariffs on steel.

Proposed 25 per cent tariffs on Mexican and Canadian goods are due to take effect on March 4, with an extra 10 per cent duty on Chinese goods.

But around South America, half a dozen officials, diplomats and trade experts said that China’s huge and growing trade lead has dulled the impact of Mr Trump’s measures – a warning sign of the potential limits more broadly of a punitive approach in a world where the United States has a growing number of economic rivals.

A senior Brazilian diplomat close to leftist President Luiz Inacio “Lula” da Silva said Brazil’s economy was not dependent on the US, citing the country’s US$30 billion (S$40.4 billion) trade surplus with China in 2024 as far more economically important.

He said Mr Trump’s trade tariff threats – coming after years of “neglect” from the US – would push countries to look for less risky alternatives like China, Europe or the Brics group, which includes Brazil, Russia, India, China and South Africa.

Beijing, meanwhile, was “a pragmatic partner” and the Chinese “come here to do business”. 

Driven by commodity giants Brazil, Chile, Peru and Argentina, South America’s exports to China have more than doubled in the past decade, while shipments to the US have only inched up, a Reuters analysis of trade data shows. 

That has made China’s huge market invaluable for regional leaders grappling with slow growth and high indebtedness, and strengthened Beijing’s soft power in the region, even with governments not ideologically aligned.

‘Bully in the neighbourhood’

US Secretary of State Marco Rubio in comments in late January dismissed the risk of pushing South American countries like Colombia more towards China as “absurd”, pointing to quick wins the administration has scored.

Tariff threats brought Mexico to the negotiation table on trade and to commit troops to reinforce the border, while a pledge to take the key Panama Canal trade route by force got that country to exit China’s Belt and Road infrastructure plan. Colombia and the US struck a deal after a block on deportation flights took the pair to the brink of a trade war.

Mr Ryan Berg, a director at bipartisan Washington think-tank the Center for Strategic and International Studies, said Mr Trump was actually giving Latin America more attention, with Spanish-speaking Rubio going there on his first overseas trip. But a balance between neglect and threat was needed.

The US State Department did not immediately respond to a Reuters request for comment.

Congressman Raja Krishnamoorthi, a Democratic ranking member of the House select committee on China, told Reuters that Washington should avoid becoming “the bully in the neighbourhood”.

“Because, you know what happens to bullies. People stand up to bullies,” he said. “And they do so in ways that could be very detrimental to our long-term national security interests.”

Blooming commodities exports

Across South America, China’s trade lead has widened, driven by grains and key electrification metals copper and lithium. Washington remains ahead in Central America, but its lead has been trimmed.

A decade ago, copper giant Peru’s largest trade partner was the US. Now it is China, by far. The Asian country gobbles up Peru’s supply of copper and has built a massive port on the country’s coast to turbocharge bilateral trade.

“The impact for Peru would be minimal,” said Peru’s former economy minister Jose Arista referring to potential US trade tariffs. He cited Peru’s free trade agreement with the US and the make-up of the Andean country’s exports.

Even in Argentina where libertarian Milei is a staunch US ally, China’s draw is clear. China is the top market for Argentine soya beans and beef, while it bought almost a third of the country’s lithium exports in 2024.

A close adviser to Mr Milei said late in 2024 that the South American country had no problem working with China if it was in Argentina’s best interests. 

Colombia does have far closer trade ties with the US but elevated diplomatic relations with China to a “strategic partnership” at the end of 2023. 

Panama, meanwhile, saw exports to China surge far above those to the US between 2021 and 2023 before a key copper mine closure led to a sharp drop-off in 2024. Tensions are still simmering with the US over the canal.

‘A gift to the Chinese’

China has natural advantages as a trade partner for South America, despite the historical closeness and cultural overlap between the US and its southern neighbours.

The relationship is not clouded by challenges over migration flows, crime or narcotics, while China’s developmental stage means it naturally needs more of the commodities South America has to offer.

The Chinese foreign ministry, in a rare rebuke of Washington’s policies in the region after Mr Rubio’s Latin America trip, issued a statement criticising the US for sowing “discord” between China and Latin American countries and pointed to an “irreversible” trend in deeper cooperation between the region and China.

Professor Li Xing, who is at the Guangdong Institute for International Strategies, said Mr Trump’s tough approach would benefit China as it would make countries hedge their bets.

“The moment there is chaos among (US) allies, that’s good for China,” he said. REUTERS