Trump's tariffs brought China and Mexico closer

Stephanie Yang, Tribune News Service

The last time Donald Trump was president, he imposed a slew of tariffs on China that upended global trade. He’s threatening to do it again. Round One inadvertently pushed China and Mexico closer together on trade and foreign investment, as China sought new trade partners and a detour for its exports to reach the US. This time Trump has taken aim not only at China but also at Mexico and other Latin American countries. The Times spoke with John Polga-Hecimovich, an associate professor of political science at the US Naval Academy, who argues that the new Trump administration could shift the balance of power among China, the US and Latin America.

How have the relationships between Latin America, China and the US changed over the last two decades? Latin American governments are starting to see China as really a viable economic alternative to the United States. In the early 2000s, a bunch of left-wing governments came to power in what was called “the pink tide.” China sought out those governments, and those governments sought out China. Then governments from the center and the right then saw the success that those left-wing governments had, and they, too, turned to China. The US response to this has been unfocused, to put it charitably. China’s economic ascension was driven by its interest in securing resources during the commodities boom. And with its global geopolitical ambitions, it certainly makes sense that China would have a long-term strategy in the region. Whereas the US strategy has ping-ponged from [Presidents] Obama to Trump to Biden to this [incoming] Trump administration.

The US has been the undisputed economic hegemon in Latin America for most of the region’s post-independence history. But over the last two decades, China really displaced the United States as the region’s top trading partner. Mexico is the big regional exception.

How did Trump’s first term affect that dynamic? Since 2016, bilateral trade between China and Mexico increased enormously. China is now Mexico’s second-largest trading partner after the United States. Part of the story is China very smartly using Mexico as a launching pad to get its goods into the United States, basically tariff-free. The majority of Mexico’s industrial activity is located in the northern part of the country: Baja California, Tijuana, Chihuahua state, Monterrey. They have these robust logistics networks and these major manufacturing hubs. That’s where Chinese companies have relocated.

The Chinese have taken advantage of the post-COVID environment to essentially move their businesses to a country that “near-shores” to the United States. This allows Chinese companies and US consumers to save on shipping costs and tariffs. The final products being made are considered completely “Mexican.” So the question is: How will the Trump administration respond to this? Will it try to renegotiate elements of the United States-Mexico-Canada Agreement? Trump has said he wants to slap a 25% tariff on all goods from Mexico and Canada. That would ruin the U.S. economy. I don’t know if that is bluster for negotiation purposes, or if he’s willfully ignorant, or both.

How has Biden addressed the growing ties between China and Mexico? Biden has not dismantled the tariffs against China that Trump put into place. I think rather than taking a stick approach, the Biden administration has taken more of a carrot approach when it comes to Mexico and what the U.S. wants out of it, which is cooperation on migration and security issues, in narcotics trafficking and especially fentanyl. So I think that trade falls a lot further down the list for the Biden administration than it would for the Trump administration.

Will that change under Trump? Now it is not enough for Latin American countries, especially Mexico, to be pro-US. They also have to be actively anti-China. Certainly the (Claudia) Sheinbaum administration in Mexico is going to be under enormous pressure to try to satisfy Trump as well as its own electorate. They’re going to have to play a really, really delicate game. I see this as a coercion-first strategy from Trump. His comments about [wanting to take control of the] Panama (Canal) — which he frames as countering China — have dominated the news. So I think Sheinbaum will have to be vocally anti-China. I don’t know if actions will have to follow words. That’s the question everyone has.

What about other Latin American countries? Mexico is the keystone country. China is the largest trade partner with Brazil and with a host of other large countries in South America. But the United States is not concerned with near-shoring in Brazil. It’s mainly focused on the places that make up the backyard of the United States: Mexico and Central America and the Caribbean. And to a much lesser extent, countries that have sought out mega investments from China, like Peru. But I think Mexico is the overriding concern for the United States, at least economically, and with regards to China.

Is there still value for China to invest in Mexico if Trump raises tariffs on Mexican goods? Absolutely. Mexico is the world’s 13th largest economy. It makes sense for China to want to have access. And it’s happy to gobble up commodities from Mexico as well. But certainly to have access to a growing middle class in a country with hundreds of millions of people makes a lot of sense for Chinese industry. So I think that’s a good bet for China, separate from the ability to use Mexico to get things into the United States.

Are there other advantages for Mexico to have closer ties with China? China has two great advantages for Mexico, and the first is that it’s not the United States. China is across the ocean, and the United States is right next to Mexico. So for better or worse, the United States and Mexico are always going to have some type of relationship, whether it’s friendly or rivalry. China is able to avoid that because it doesn’t have 200 years of history with Mexico.

The second is that China doesn’t really care what type of government is in power. The United States under Biden has issued declarations about its worries over human rights and civil liberties and judicial elections, basically commenting on the erosion of democracy in Mexico. You know who doesn’t comment on the erosion of democracy in Mexico? China. That is seen as a really big plus from a bunch of Latin American leaders, especially authoritarians.

Are there any concerns for Latin American countries about becoming more reliant on China? Trade and investment from China have not brought about wholesale change the way that these places thought it would. Latin Americans right now are having a little bit of buyer’s remorse. These countries are seeing that Chinese companies haven’t paid attention to the environment. They haven’t necessarily employed Latin Americans, they’ve employed Chinese workers. The supposed benefits haven’t materialised the way that they expected or were promised, and they are seeing that maybe replacing one hegemon with another isn’t necessarily making life better for everyone.