Home Latin America How Latin America Can Navigate U.S.-China Trade Wars: Americas Quarterly

How Latin America Can Navigate U.S.-China Trade Wars: Americas Quarterly

How Latin America Can Navigate U.S.-China Trade Wars: Americas Quarterly
QUITO, ECUADOR - APRIL 10: Vice President of Ecuador María Alejandra Muñoz (R) waves to the press during the arrival of doses of the Sinovac Covid-19 vaccine at Mariscal Sucre International Airport on April 10, 2021 in Quito, Ecuador. The shipment cointans a batch of 700 thousand anti-COVID-19 vaccines, which is part of a total of one million Sinovac vaccines agreed between Ecuador's government and China. (Photo by Hamilton Lopez / Getty Images)

In the evolving debate over the US-China relationship, and how it will impact Latin American countries, many observers perceive a recent shift. After Washington and Beijing reached their “Phase One” trade deal in January 2020, many assumed that the trade wars that peaked during the Trump administration had effectively ended. The focus thus turned instead to non-trade issues – questions of strategy, technology and ideology which seem to dominate attention today.

But the truth is that trade tensions never quite disappeared, and they are worth revisiting now for at least two reasons. First, for much of Latin America, growing ties with China have been propelled above all else by trade and broader economic considerations — not geopolitics. Second, since the onset of the pandemic in March 2020, COVID-induced supply chain disruptions (including a massive increase in international transport costs) and trade policy restrictions have once again stress-tested global commerce, with profound implications for Latin America in the short and long-term.

To explain, it is useful to review where the relationship stands today. Trade between China and Latin America and the Caribbean (LAC) held steady at approximately $315 billion in 2020, practically unchanged from 2019. This is remarkable because the pandemic wreaked havoc on LAC exports overall in 2020, causing an estimated 11.3% year-on-year contraction (including a 14.6% decline in shipments to the US). In the meantime, a fast-recovering China stood out as the only exception among LAC’s major destination markets by registering a 2.1% year-on-year increase in exports from LAC. The resilience of China-LAC trade follows an impressive 20-year trajectory between 2000 and 2020. During this period, bilateral trade grew more than 25 times (from a low base of $12 billion) and China’s share of total LAC trade multiplied eight-fold (from 1.7% to 14.4%).

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