In the event of a possible second Trump administration, trade relations with Mexico are expected to be a key focal point. The Trump administration’s revamp of the U.S.-Mexico-Canada (USMCA) trade deal is likely to come under scrutiny, with the next U.S. president having the opportunity to confirm the country’s commitment to the agreement. The potential for higher tariffs and increased inward investment in U.S. manufacturing may be on the table, which could impact Mexico’s economic growth. The Mexican peso is anticipated to be volatile in the lead-up to the U.S. election as traders navigate the uncertainty surrounding the outcome and its implications for bilateral trade.
Two of Latin America’s prominent right-wing populists, El Salvador’s President Nayib Bukele and Argentina’s President Javier Milei, have displayed affiliations with former President Trump. Both countries are seeking financial support from the International Monetary Fund (IMF). The endorsement and financial support provided to Argentina by Trump in 2018 are likely to influence Milei’s approach to seeking a new IMF program. El Salvador’s Bukele is also expected to reengage with the IMF post-U.S. election, potentially leveraging Trump’s influence to secure financial assistance. The personal relationships between these leaders and the Trump administration could have implications for their countries’ economic policies and international relations.
Venezuela’s upcoming presidential election on July 28 will play a crucial role in determining its prospects of rejoining the international community. The Trump administration intensified sanctions against Venezuela, while Biden has shown interest in reestablishing diplomatic ties. The resolution of Venezuela’s massive debt, owed primarily in sovereign bonds, is contingent on the U.S. government’s stance on issuing new bonds, currently prohibited due to sanctions. The potential for a change in approach towards Venezuela under a second Trump administration may impact the country’s financial outlook and relationships with international partners.
Authoritarian governments in Cuba and Nicaragua are likely to face increased scrutiny and strained relationships under a second Trump administration. The administration’s hardline stance towards regimes deemed oppressive or undemocratic could lead to further tensions and sanctions against these countries. The implications of deteriorating relations with Cuba and Nicaragua could have far-reaching consequences for regional stability and security.
The continuation of hurdles and trade barriers imposed on China by the Trump administration, further exacerbated by Biden, may have repercussions for Latin American commodity exporters. With China being a significant trade partner for countries like Brazil, Argentina, Mexico, and Chile, any escalation in the ongoing trade war could result in increased costs and challenges for these exporters. The possibility of China devaluing its currency to boost exports could further complicate trade dynamics and economic relations between Latin American countries and Beijing.
A possible second Trump administration could have multifaceted implications for Latin America, ranging from trade relations and financial assistance to diplomatic ties and regional stability. The complex interplay of political dynamics, personal relationships, and economic policies between the U.S. and Latin American countries underscores the need for a nuanced understanding of the potential outcomes and challenges that may arise in the region.