As the trade landscape shifts due to President Donald Trump’s tariffs, South America finds itself at a crossroads, particularly Brazil, the continent’s largest economy. Brazil is the world’s largest producer of coffee and fifth in producing footwear. As global trade dynamics continue to shift, the country stands to benefit greatly and suffer dearly. Countries, including China and Japan, are re-evaluating their import approaches. Consequently, the region’s agricultural and commodity exports are now facing punitive action.
The coffee-growing world watched as Brazil further cemented its role as the undisputed Goliath of the global coffee market. The country that tops them in production is set to expand its agricultural exports to China the most. This would be a much-needed supplement to the U.S. supplies hit hard by tariff changes. With China recently becoming Brazil’s top export market, the potential for growth in this sector is great.
In footwear, Brazilian manufacturers stand to gain from the anti-China tariffs. Trump’s tariffs on Chinese exports have reached as high as 25%, which opens a door for Brazil’s shoemakers to enhance their market share in the United States. This would result in additional exports, further enhancing the positive impact on Brazil’s economy at a time of global trade headwinds.
Yet, the tariffs are not without their own set of complexities. Brazilian and Argentine steel and aluminum exports to the U.S. are now subject to a 25-percent tariff. This barrier effectively hollows out their ability to compete in arguably the world’s biggest market. As Eduardo Levy Yeyati—former chief economist for the Central Bank of Argentina—notes, such shifts represent a “serious headwind” for South America’s economies. Key to his argument is the unknowns around future commodity prices and global demand.
In terms of beef trade alone, Japan currently imports around 40% of its beef from the U.S. This leaves an opening for Brazil to move in and occupy that space. Brazilian beef producers are hoping that Japanese consumers will now seek out their products instead of American imports. The other applications are stiff competition. If customs restrictions weren’t enough, consider the fact that Trump’s primary focus was on increasing domestic production within the U.S.
The increasing global commodity price volatility is a second key worry for South America. Under Trump’s punitive tariff regime, commodities in the US from oil to copper skyrocketed in price, plummeting through the floor in mere months. This unpredictability adds a further layer of economic uncertainty for countries that depend on these exports.
Additionally, Uruguay’s new President, Yamandú Orsi, has emphasized that Trump’s tariffs could facilitate a trade deal between the European Union and Mercosur, the South American bloc comprising Brazil, Argentina, Paraguay, and Uruguay. This potential agreement would open up new doors to trade with one of the fastest growing regions in the world.
Even with all that opportunity, experts are still wary of South America’s preparedness to take full advantage of them. Yet even as specific opportunities materialize, Juan Carlos Hallak cautions that the tide may not turn dramatically. He states, “I’m not sure Latin America is ready to take advantage of those opportunities. There will be specific opportunities for sure, but something that changes the game? I don’t think so.”
And the worries go beyond the prospect of increased trade benefits. Carlos Vaccaro raises alarms about the limitations imposed by U.S. tariffs, expressing worries about “the diversion of what can no longer enter the U.S.” This frustration is shared by many exporters across South America, who are trying to meet the conflicting policy realities that have engulfed international trade lately.