Tractor trailers enter the United States from Canada at the Pacific Highway border crossing in Blaine, Washington, on Dec 18. DAVID RYDER VIA GETTY IMAGES
While potential US tariffs on Canada and Mexico have received much attention, experts warn that the South American nations of Brazil and Argentina also could be affected.
"The US, Brazil's second-largest trading partner after China, plays a crucial role in Brazil's export market, particularly in medium- and high-tech goods," Jose Luis Oreiro, an associate professor of the Department of Economics of the University of Brasilia, told China Daily.
"These tariffs, if they are really implemented, will be a mortal blow to the recent surge of manufacturing industry in Brazil after almost 15 years of stagnation (in) manufacturing output," Oreiro said.
According to Oreiro, the manufacturing output has been crucial to the economic boom in Brazil.
However, he mentioned that increasing tariffs will hinder that, leading to higher unemployment and income inequality.
"Manufacturing jobs offer higher wages, which is critical for reducing inequality," Oreiro said. "If these jobs vanish, workers will be pushed into lower-paying service sector roles.
"In 2022, 62.4 percent of entrepreneurial R&D investments in Brazil were tied to manufacturing. Without robust exports, these investments will shrink, dragging down the technological competitiveness of the sector," he said.
Oreiro also pointed to risks in Brazil's monetary policy. A decline in exports could lead to currency depreciation, triggering inflation and forcing the central bank to raise interest rates, potentially to as high as 20 percent annually.
"This would increase government deficits and hurt long-term investment," he said.
Despite the challenges, Oreiro sees opportunities for Brazil to strengthen trade ties with other partners, such as the European Union and Asian countries. He cited the recent Mercosur-EU free trade agreement finalized on Dec 6 as a promising step forward.
'Simplistic view'
Referring to US President-elect Donald Trump's remarks defending tariffs, Welber Barral, former foreign trade secretary in Brazil's Ministry of Development, Industry, Trade and Service, told China Daily, "This is a simplistic view of international trade."
Trump has argued that tariffs would make the US "rich" while accusing countries like Brazil of unfair trade practices.
"For one, Brazil doesn't even set national tariffs; we follow the Mercosur's common (external) tariff," said Barral, who has served as an arbitrator at the Permanent Review Tribunal of Mercosur and in the dispute settlement system of the World Trade Organization.
"While average tariffs may seem high, most US imports, such as electronics and equipment, face much lower rates," he said.
"On the other hand, the US imposes high tariffs on our competitive products like orange juice, steel and aluminum," he added.
"Unilateral tariffs have historically had negative consequences, prompting retaliation and global economic downturns," Barral said.
He said the impact of potential US tariffs on Brazil might be sector-specific. While crude oil, Brazil's top export to the United States, is unlikely to face new tariffs, industries like metals could bear the brunt.
"Steel, aluminum, and copper are critical to the US industry but remain vulnerable to tariff hikes," he noted.
Barral criticized what he called the US' protectionist policies, arguing their unpredictability harms not just global trade but also US interests.
"Unexpected and unpredictable economic measures deter international investments. The Trump administration's threats could complicate bilateral investments and reduce US investment in Brazil," he said.
He also expressed doubts over the feasibility of a broader bilateral trade agreement between Brazil and the US.
"I don't foresee any large trade agreement due to the US protectionism in the agricultural sector," Barral said, highlighting a longstanding obstacle in the relationship.
"Since 2008, the US has not been Brazil's most significant trading partner; that title belongs to China, followed by the European Union. The EU-Mercosur trade agreement could further boost Brazilian exports to Europe," he said.
Barral also mentioned the ongoing Mercosur negotiations with European Free Trade Association countries, Canada, and the United Arab Emirates as evidence of diversification.
"Brazil must focus on reducing trade barriers, improving logistics and facilitating financing for smaller exporters," Barral noted. Such measures, he said, require long-term political coordination in Brazil's complex and diverse economic landscape.
"Latin America is a peaceful region with a young, growing population and expanding consumer markets. It has plentiful natural resources and a stable political climate compared to other parts of the world," he said.
Those characteristics provide the region with a unique opportunity to strengthen the region's global trade presence, he said.
Argentina, South America's second-largest economy, has its own set of challenges under the shadow of US tariff policy. The country's fragile economic recovery, led by President Javier Milei's reforms, from years of stagnation and hyperinflation leaves it particularly vulnerable to external shocks.
"If tariffs like 10 percent on most countries, including Argentina, or even 25 percent on Canada and Mexico, are implemented, the global economy will face slower growth and higher prices," Luciano Campos, a professor at the University of Buenos Aires and a senior economist for Numera Analytics' Macro Research practice, told China Daily.
"High taxes, rigid labor markets and outdated price controls have further weakened its competitiveness," Campos said. "The stabilization plan has lowered inflation significantly and brought some economic growth," Campos said, but added that Argentina's economy remains vulnerable.
"Tariffs would hurt Argentina, particularly in sectors like oil, minerals and commodities such as aluminum and gold, which are key exports to the US," Campos said.
More concerning, Campos suggested, are the indirect effects.
"If the US imposes tariffs on China and other major economies, the resulting global slowdown would affect the demand for Argentine goods," he said.
"Free trade lowers costs by allowing countries to specialize. Disrupting that creates inefficiencies, driving up prices for everyone," he said.
Emerging markets like Argentina could be particularly vulnerable, as higher global inflation may worsen debt servicing and fiscal stability.
"For Argentina, the bigger concern is maintaining domestic economic stability," Campos said.
Campos suggested that Argentina could mitigate potential trade shocks by diversifying its economic partnerships.
A volunteer serves food to a group of people at a Christmas solidarity dinner for the homeless in Buenos Aires on Dec 24, as poverty reaches more than half of the Argentine population. TOMAS CUESTA/AFP
"Argentina could strengthen ties with China, which is already a more significant partner than the US, or look to the European Union through agreements like the Mercosur-EU trade deal," he said.
Campos acknowledged the recent reforms in Argentina, including a Ministry of Deregulation, aimed at modernizing the economy.
"If Argentina continues this trajectory, it could become more resilient and attract investment, but it's a slow and challenging process," he said, adding that diversification of economic partners should be Argentina's priority.
Campos expressed cautious optimism over Argentina's long-term prospects.
"The country's path to sustainable growth lies in continuing structural reforms, fostering trade diversification and improving competitiveness," he said.
Canada faces significant economic and strategic challenges following Trump's proposal to impose a 25 percent tariff on its goods.
Global shock
Peter Phillips, a distinguished professor at the University of Saskatchewan, told China Daily, "This is not just a Canadian issue; it's a global economic shock." He said such tariffs could disrupt industries, supply chains and bilateral relations.
"The tariffs' impact on Canada's GDP is estimated to be from 1 to 5 percent," said Phillips, an economist who was also a senior policy adviser in Canadian industry and government.
He said Canada's automotive sector was particularly vulnerable, given the deep integration of North American supply chains.
"We export roughly $30 billion worth of cars and trucks to the US annually, and our trade is balanced, with nearly equal imports," he said.
"A disruption in this sector could trigger significant challenges for just-in-time manufacturing systems," he said.
Agriculture also could be affected, he said, especially red meat and livestock, because of the industry's heavy reliance on the US market.
"For products such as grains and oilseed, Canada might find another market, but not for the red meat.
"The supply chains are so deeply intertwined that tariffs would cause shortages and price spikes on both sides of the border," Phillips said.
He also mentioned potential regional difficulties inside Canada, most specifically in seasonal agricultural exports, which include fruits and vegetables.
"These exports are critically important to the US market during certain times of the year, and any disruption could create challenges for both countries," he noted.
While the tariffs present substantial risks, Phillips sees opportunities for Canada to rethink its trade strategy.
"The US has always been Canada's easiest and most profitable market, but this is a wake-up call to look elsewhere," he said.
He also urged a readjustment toward domestic-oriented economic policies, such as weaning off raw material exports and nurturing innovative industries, like biotechnology and advanced manufacturing.
"This could push Canada to achieve long-term gains, even if the immediate impact is disruptive," he said.
Ontario Premier Doug Ford suggested that the province could cut off energy exports to the US.
"Interrupting energy exports could destabilize the integrated North American power grid, which relies on seamless flows across borders," Phillips said.
"It could lead to brownouts or price spikes, not just in the US but also in Canadian provinces like Quebec, where electricity exports are a major economic driver," he said.
Phillips said the US tariffs reflect a broader shift away from the principles of the global trade system, which has traditionally been built on trust and cooperation.
"This kind of 'America first' model undermines the stability of international trade and creates volatility that's bad for everyone," he said.
Marjorie Griffin Cohen, a Canadian economist and a professor at Simon Fraser University, told China Daily, "Canada could face profound economic and political consequences if the proposed 25 percent tariffs on Canadian goods materialize.
"This would radically alter both the Canadian economy and the global trading system shaped by the 'Washington consensus'," Cohen said.
"If Trump unilaterally raises tariffs, it will erode confidence in the World Trade Organization and the rules governing North American trade deals," she said.
Cohen said tariffs targeting oil and gas would be particularly devastating.
"There's no existing pipeline to transport Alberta oil to the eastern provinces, and building one would take years," she said. "While some more could be shipped west for export, this would be no substitute because the volume would not make up for the lost sales to the US."
She cited the US' long-standing push for access to Canada's controlled markets for poultry, eggs and dairy products.
"These industries would struggle to survive a massive influx of American products," she said.
Containers are lifted to the COSCO Shipping Argentina vessel at the Tianjin Port on May 6, marking the launch of a new direct route from China to ports in South America. TONG YU/CHINA NEWS SERVICE
Trump's lack of interest in climate policies, Cohen said, complicates matters. "A large tariff will drive down prices for Canadian energy producers, putting pressure on governments to increase subsidies and reduce regulations," she said.
The potential tariffs also underscore Canada's reliance on the US market, a vulnerability rooted in trade agreements like the United States-Mexico-Canada Agreement.
"Canada's economy is shaped by its relationship with the US, and these agreements have made the country less self-sufficient," Cohen said. "Canada needs to think long term and shift from primarily exporting resources to producing more of what it needs domestically.
"This will also require rethinking foreign policy to prioritize Canada's interests over closely following US decisions," she said.
Mexico is also on the list of potential tariffs. The US has threatened tariffs as high as 25 percent, with conditions tied to cooperation at the border on migration and illicit drugs.
Negotiation strategy
Luis de la Calle, former undersecretary for international trade negotiations at Mexico's Ministry of Economy, described the proposed tariffs as part of a broader negotiation strategy rather than a credible long-term threat.
"The US and Mexico are too interconnected to fully decouple," he told China Daily.
"Geography and shared production systems make diversification a challenge, but they also create strong arguments for exempting Mexico from broad tariff measures," he said.
While such policies have sparked concern, de la Calle was more skeptical about their sustainability over the long term, given the extensive trade relationships that the tariffs would disrupt economically in both countries.
"Historically, energy products and highly integrated sectors like electronics and autos have been spared from tariffs due to their critical role in supply chains," he said.
De la Calle urged the country to bolster its competitiveness, viewing it as essential not only to maintain access to the US market but also to secure new trade opportunities.
"The answer to tariffs is becoming more competitive; the more competitive we are, the stronger our case for free trade and investment," he said.
Mexico's economy relies heavily on trade with the US, particularly in manufacturing and agriculture.
The potential tariffs could pressure Mexico to strengthen ties with Europe and Asia, de la Calle said.
However, he acknowledged the limits of diversification. "You can't fully diversify away from a market as large as the US," he said.
As Mexico prepares for a review of its trade agreements in 2026, de la Calle emphasized the importance of careful management in the coming months.
"The initial response to these tariff threats will set the tone for future negotiations. Mismanagement could complicate trade reviews, while a measured approach could ease tensions," he said.
Ultimately, de la Calle said he believes Mexico must double down on its long-term strategy to enhance competitiveness and build alliances.
"We need to strengthen our relationships across the Atlantic and Pacific. The more integrated we are globally, the harder it will be for the US to undermine North American cooperation," he added.
gaoyang@chinadailyusa.com
