How US tariffs could impact Latin America

Most Latin American countries will be subject to the 10% baseline tariff imposed by US President Donald Trump that entered into force on April 9, with higher levies for Guyana (38%), Nicaragua (18%) and Venezuela (15%), although these have been paused for 90 days. Mexico is subject to a different tariff structure, with a 25% tariff implemented in March, although with significant exceptions. 

Our baseline scenario has assumed since December 2024 a 10% universal tariff on all countries/territories in the region, except Mexico, for which we projected a 25% tariff in our March round. As this has proved accurate, we will not significantly alter our forecasts for most markets, based on the direct impact of the new US tariffs. 

We also anticipate second-round effects, as growth in trading partners outside the region, such as the US, mainland China and Europe, is also likely to be significantly reduced by the tariffs. Based on preliminary estimates, the forecast for global growth in 2025 will be revised downward by four-tenths of a percentage point due to the tariffs announced on April 2. This adjustment is primarily driven by anticipated declines in growth in the US and in mainland China. 

A more pronounced global slowdown than previously anticipated would adversely affect our real GDP growth forecasts for the region, as multiple transmission channels — trade, foreign direct investment and remittances — would be impacted. 

Uncertainty surrounding tariffs and potential bilateral negotiations between the US and its trade partners is likely to delay investment decisions. Latin American countries are mainly commodity exporters, and a slowdown in global trade and global economic growth is likely to soften commodity prices, reducing export and fiscal revenues for exporters of oil (such as Brazil, Mexico and Colombia), soybeans (Brazil and Argentina), and copper (Chile and Peru).

The US widely ranks as the largest or second-largest trading partner for several countries in the region. The region’s reliance on US trade and the fact that no country has announced countermeasures to date support our view that reciprocal tariffs are unlikely. Instead, Latin American countries are likely to seek negotiations to reduce or postpone the implementation of tariffs or to exempt specific products.

Most countries have limited economic leverage to reciprocate and are more likely to offer concessions on security, such as combating criminal organizations and drug trafficking; strengthening illegal migration control; and increasing support with deportations of their migrants from the US, particularly Mexico, Central America and northern South American countries.

In South America, resource-rich countries, such as Argentina, Chile and Peru, are likely to offer increased investment opportunities in key sectors, such as mining, energy and infrastructure, or eliminate existing trade barriers for certain US products.

Higher impact: Mexico and Venezuela

A previously announced 25% universal tariff affecting Mexico entered into force on March 12, although the country was exempted from the new 10% tariff. Mexico had successfully negotiated partial waivers, with exports under the United States-Mexico-Canada Agreement (USMCA) exempt, while automotive exports incur the 25% tariff only on foreign content from outside North America.

This led us to revise our projection of a 25% universal tariff for Mexico down to an average of approximately 10.5%. This adjustment is likely to permit us to raise our forecast for Mexican real GDP growth in 2025. The amended tariff configuration will also help Mexico maintain a competitive edge as a source country for the US market, especially vis-à-vis Asian markets. Mexican officials are negotiating exemptions to the 25% tariffs on steel, aluminum and automotive imports, with progress likely to lower the probability of countermeasures.

For Venezuela, the US had previously announced secondary tariffs of 25% on all countries importing Venezuelan oil. If these tariffs are fully implemented, and major buyers like mainland China, India, Spain and Italy reduce crude imports, Venezuela would face a major reduction in foreign exchange revenues.

We forecast that the combined impact of US oil sanctions and new tariffs will decrease Venezuela’s GDP in 2025, compared with the current baseline forecast of an expansion. This revenue loss and economic decline would be unsustainable and potentially destabilizing for the Maduro administration.

In response, Venezuela would likely seek to increase black-market oil sales to mainland China at discounted prices, although these are unlikely to fully offset revenue losses. The government also probably would seek to comply more fully with US demands for the repatriation of Venezuelan migrants in the US to facilitate negotiations to permit the continuation of US-bound oil exports.

Medium impact: Argentina and Brazil

As members of the Mercosur trading bloc, Argentina and Brazil have higher overall tariffs on US imports than the other way around. Although Brazil’s Congress has approved a bill allowing the government to impose reciprocal tariffs, President Luiz Inácio Lula da Silva is likely to prioritize negotiations with the US before considering countermeasures. Brazilian exports to the US make up about 11% of the total exports; therefore, the new 10% tariffs are unlikely to significantly hinder Brazilian economic growth.

Argentine President Javier Milei closely aligns with Trump and will avoid antagonizing the US. His administration is currently negotiating a trade deal with the US to reduce tariffs on approximately 50 Argentine products, including agricultural and fishing produce. In 2024, Argentine exports to the US accounted for 8% of its total, with the hydrocarbon sector making up a quarter and remaining exempt from US tariffs.

We do not foresee significant changes in forecast Argentine GDP growth, as the 10% general tariff was already factored into our forecast for 2025. Officials from both Argentina and Brazil are currently negotiating the previously imposed 25% tariffs on steel and aluminum, seeking exemptions, reductions or, in the case of Brazil, a duty-free quota.

Lower impact: Chile, Colombia and Peru

Tariffs are likely to have a limited impact on Chile, Colombia and Peru, the only South American countries with free trade agreements (FTAs) with the US. Their primary exports to the US — copper for Chile and Peru, and oil for Colombia — remain exempt from tariffs as the Trump administration continues its review, and we anticipate minimal economic impact.

We have maintained GDP growth forecasts for Colombia, Chile and for Peru in 2025. These three countries are likely to negotiate with the US through institutional channels and diplomatic engagement, with Chilean officials announcing plans to request consultations under the FTA. They will probably offer increased investment opportunities to US firms

Expanding to new markets or deepening trade links with existing trade partners is also probable. Chile and Peru are unlikely to reduce their trade with mainland China, their primary trading partner and buyer of copper.

In early April, Chilean President Gabriel Boric signed agreements with India to enhance cooperation on this mineral, including long-term supply for Indian companies, strengthening supply chains and promoting investment. These countries are also likely to explore opportunities to leverage their lower US tariffs versus competitors’ in other sectors if the higher tariffs are effectively activated after the 90-day pause, in areas like Colombian coffee (favorably positioned relative to supply from Vietnam, which would be subject to a 46% tariff) and Chilean salmon (competing with supplies from Norway, which would be subject to a 16% tariff).

This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.