How the U.S.-China Trade War is Redefining Latin America

Dear all,

We welcome you to the Greater Caribbean Monitor (GCaM). This is a somewhat special issue, as we are observing Independence Day weekend in most Central American nations.

In this issue, you will find:

•How the U.S.-China Trade War is Redefining Latin America

•Brazil’s Most Powerful Judge Goes to Bat for the Left

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The GCaM Team

•How the U.S.-China Trade War is Redefining Latin America
704 words | 4 minutes reading time

The ongoing trade war between the United States and China, marked by escalating tariffs and economic nationalism, has reverberated across the globe, with Latin America being one of the regions caught in the crossfire. Although the trade war is largely portrayed as a bilateral battle between two global superpowers, the ripple effects have imposed hardships on Latin American economies. 

Panorama. Countries like Mexico and Argentina—some of the largest economies in the region—have found themselves grappling with a complex set of challenges as they navigate between the competing interests of their two largest trading partners.

• Mexico, as a member of the U.S.-Mexico-Canada Agreement (USMCA), benefits from privileged access to the U.S. market. However, the agreement has inadvertently created a loophole, allowing Chinese goods to circumvent U.S. tariffs by using Mexico as their final assembly destination.

• Haier, a Chinese company, holds a 48% stake in Mabe, a major appliance manufacturer in Mexico and Central America that relies on Chinese technology. Tariffs on Chinese goods have raised production costs, making everyday appliances more expensive for the general public.

• Argentina has faced challenges as tariffs on Chinese tech exports, such as semiconductors and telecommunications equipment, have cut off access to affordable technology. U.S. restrictions on Huawei, a key player in 5G infrastructure, have slowed Argentina’s digital modernization efforts.
  
  

Why It Matters. Rising living costs and politically driven trade complexities are particularly harmful to the most sluggish and unsophisticated economies in Latin America, such as those in Central America’s Northern Triangle.

• In Guatemala, where Chinese machinery is vital for production, tariffs have raised costs, diminishing the global competitiveness of Guatemalan agro-industrial products, which represent nearly 45% of the country’s total exports.

• Likewise, Costa Rica’s hydroelectric energy sector, heavily dependent on Chinese capital and components, has been severely impacted by the trade war. In May 2024, droughts caused by the El Niño phenomenon triggered an energy crisis, leading to electricity rationing with shutdowns lasting up to three hours per day. This is quite remarkable for Costa Rica, a country often regarded as considerably developed by regional standards.
  

• These developments are particularly troubling for U.S. national security interests, as countries like Honduras and El Salvador, not to mention Washington-averse Nicaragua, are increasingly aligning themselves with Beijing.
  
  

Between the Lines. While the United States remains the region’s largest economic partner, Latin America is in a complex position, relying on both U.S. and Chinese investments and goods while seeking to maintain strong relations with Washington and Beijing. This delicate balancing act has heightened the vulnerability of Latin American economies, which are heavily reliant on foreign trade. 

• In the first half of 2023, Latin America and the Caribbean accounted for approximately 22% of the United States’ total foreign trade. Exports from the region to the United States amounted to $258 billion, while imports amounted to $308 billion, both figures reflecting a slight decline compared to the previous year.

• In the same period, trade between Latin America and China reached significant levels, totaling $208 billion in exports from Latin America to China and $242 billion in imports from China to the region.

• U.S. FDI in Latin America and the Caribbean amounted to 33% of the region’s total FDI inflows, while Chinese FDI reached approximately $8.75 billion, representing around 10% of the region’s total. 
  
  

Balance. Tariffs and restrictions have made it more difficult for Latin American countries to modernize key sectors, such as technology and infrastructure. As both the United States and China continue to push for their respective spheres of influence, Latin American nations could find themselves increasingly squeezed by both sides. 

• While this presents challenges for both economic superpowers, evidence shows that despite tariffs, Latin America, particularly South America, is increasingly trading more with China than with the United States. By 2035, trade between China and Latin America is expected to exceed $700 billion, potentially surpassing U.S. trade in more countries across the region. 

• As Latin American countries increasingly view U.S.-imposed trade restrictions on China as burdensome, they may begin to see Beijing as a more reliable and supportive partner.

• By 2023, 21 countries in the region had joined China’s Belt and Road Initiative, strengthening economic and diplomatic ties with Beijing at the expense of U.S. influence. Even long-standing Washington allies like Ecuador have signed free trade agreements with China after failing to secure similar deals with the United States.
  
  

•Brazil’s Most Powerful Judge Goes to Bat for the Left
604 words | 3 minutes reading time

Brazil’s most powerful judge has, for the time being, won his battle against Elon Musk and X, formerly known as Twitter. Nonetheless, Supreme Court justice Alexandre de Moraes now faces criminal prosecution, as well as impeachment proceedings brought against him by the opposition.

Panorama. After a long list of clashes between Alexandre de Moraes and Musk, the former ordered the suspension of X’s services in Brazil, imposing fines of up to $9,000 on those caught using VPN services to access the social network. Moraes claims this is because X failed to name a legal representative in Brazil, i.e. someone who could be held legally liable for X’s supposed violations.

• Moraes also hit out against Starlink—a company not linked to X, but owned by Musk—and froze its Brazilian accounts a day after Musk announced the closure of X’s offices in the country. Starlink provides internet services to around 215,000 Brazilians. 

• Starlink said it would abide by the order, but deemed the measures against it “illegal.” Nonetheless, the head-on war between Musk and Moraes is far from over.

• On Friday, Moraes unfroze X and Starlink’s accounts, although not without first confiscating $1.3 million from X and $1.9 million from Starlink, ostensibly to “settle” fines. X will remain banned, as Musk has no intention of complying with court orders to remove accounts supposedly spreading misinformation.
  
  

Voices. On August 31, the last day Brazilians had access to X, Musk claimed, “There is growing evidence that fake judge [Moraes] engaged in serious, repeated, and deliberate election interference in Brazil’s last presidential election. Under Brazilian law, that would mean up to 20 years in prison.”

• He added, “I’m sorry to say that it appears that some former Twitter employees were complicit in helping him do so.” Subsequent investigations have revealed that in 2022, Twitter provided Moraes with account data.

• Indeed, then-President Jair Bolsonaro filed a complaint against the selective removal of accounts. Moraes dismissed the suit, instead launching an investigation against Bolsonaro for his use of  “digital militias.”
  
  

Between the Lines. An interview with Eduardo Tagliaferro, Moraes’ erstwhile confidante during his time at the Supreme Electoral Court (TSE), suggests that Moraes deliberately targeted right-wing sympathizers during Brazil’s 2022 election campaign. Tagliaferro, now embroiled in legal troubles, stated that Moraes’ assistant judge, Airton Vieira, ordered him to investigate and prosecute pro-Bolsonaro figures.  

• According to former Paraná state deputy Homero Marchese, Moraes asked Vieira to draft reports with information the judge himself provided. This hand-picked “evidence” was later cited as anonymous in official documents.

• Leaked TSE messages show that Moraes requested specific adjustments to adapt TSE reports to his preferences, going as far as to minutely modify documents’ wording. He would later hand down sentences based on these reports.

• In one of the leaked messages, Vieira ordered the prosecution of Gazeta do Povo journalist Rodrigo Constantino, saying, “Block him and fine him. Please do your best with the report. Ha ha. Then, send it officially, by email.” Constantino is a noteworthy conservative.
  
  

Why It Matters. The timing of the dispute between the judge and Elon Musk is no coincidence. Municipal elections will be held on October 6. In Brazil, these elections are considered the equivalent of the U.S. midterms. Moraes is still following his 2022 playbook, but its execution has grown more difficult, since he can no longer rely on X as an ally.

• The Brazilian opposition has brought impeachment proceedings against Moraes, but it remains to be seen whether right-wing Senate President Rodrigo Pachecho will allow the procedure to advance.

• Additionally, a public petition has collected more than 1.3 million signatures in favor of Moraes’ removal.

• This is, if anything, proof of the utter politicization of the Brazilian judiciary. Moraes has become the left’s greatest activist.