Arxius de Research - Page 8 of 19

On 3 April, global equity markets tumbled following the Trump administration’s announcement of reciprocal tariffs. First Asia, then Europe—and most notably the United States—saw sharp declines amid fears of the start of an unprecedented trade war. One region, however, bucked the trend: Latin America. Some of its major markets, including Mexico, Brazil and Chile, ended the session in positive territory. So, why did they hold up comparatively well? Let’s take a closer look. By now, it is clear that the US administration largely based its tariff calculations on the size of the trade deficit of the United States with respect to each country. In this regard, Latin America has emerged relatively unscathed. The region does not run large trade surpluses with the US, which means that most of its countries—including Brazil, Colombia, Argentina, Chile and Peru—have only been subject to the general minimum tariff rate of 10%. In addition to the relatively limited direct impact on their exporters, this environment has the potential to make them more competitive in comparison with their Asian and European counterparts in their most important market. Mexico, however, merits a separate examination. Alongside Canada, it was among the first targets of the new administration. On 1 February, President Trump announced 25% tariffs on all Mexican imports, calling on the country’s authorities to take immediate action against fentanyl trafficking and illegal immigration. Mexico’s President, Claudia Sheinbaum, agreed to engage, securing a 30-day postponement of the decision. In March, following further negotiations, the United States opted to delay its final decision until 2 April—the now well-known Liberation Day. When that day arrived, after two tense months, Mexico was granted an exception from the new tariffs, thanks to productive negotiations and, crucially, the protections offered by the existing USMCA free trade agreement. That said, 25% tariffs will still apply to steel, aluminium and vehicles manufactured in Mexico, as these fall outside the scope of the agreement. In conclusion, at the time of writing, Mexico has also come out of this situation relatively well. The Mexican peso has strengthened by 4.5% against the dollar so far this year, while the Mexbol has gained 9.2%. All of this helps explain why markets remain relatively optimistic about the region in the current environment. It is difficult to find silver linings when it comes to the imposition of trade barriers, but Latin America—although not unaffected—may well find opportunity amid the turbulence. Date of report: April 4th 2025

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