March 21, 2025
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The Risks of the United States' Latin America Policy
The short-term benefits could create long-term problems.
By: Allison Fedirka
The past couple of months have shown, for better or worse, that Latin America will figure more prominently in U.S. foreign policy under the second Trump term than under previous administrations. Indeed, Washington’s priorities for Latin America – migration, China and tariffs – are meant to support, or are an extension of, the government’s broader America First vision. But the current strategy to reset ties with and thus stabilize the region may have unintended consequences that run counter to Washington’s goals.
The Trump administration’s north star for engaging the region is immigration. It has approached the issue from a security standpoint, warning that the unchecked flow of migrants facilitates the entrance of drugs and criminals into the country. This explains why Washington has added several drug trafficking and violent crime groups – including Venezuela's Tren de Aragua; El Salvador's MS-13; Colombia’s Gulf Clan; and Mexico’s Sinaloa Cartel, Jalisco New Generation Cartel, Northeast Cartel, La Familia Michoacana, and United Cartels – to its official list of terrorist organizations giving it even more options to disrupt these groups’ operations. The Trump administration has also taken more direct measures against migrants flowing into the U.S. by ending protected status for people from several Latin American countries, eliminating the ability to seek asylum at the U.S.-Mexico border, and upping deportations.
To induce Latin American countries to take in deportees, the U.S. introduced the threat of tariffs. Colombia was one of the first countries targeted to receive returning migrant flights. Initially, the Petro government objected to the way in which the individuals were transported to Colombia. The U.S. subsequently announced that it would put 25 percent tariffs on all Colombian goods – plainly understood as punishment for not accepting the migrants. Within 24 hours, Bogota changed its stance, the migrants arrived in Colombia, and the tariffs were never enacted. Other Latin American countries took note. Honduras reversed course on a decision to end a long-running extradition treaty with the United States. Wanting to avoid a confrontation entirely, Brazil said it would receive the humane transport of deportees. Costa Rica agreed to receive 200 migrants, and in exchange, Washington issued a waiver for it to continue receiving funding for counter-narcotics activities despite the global aid freeze. Most notably, El Salvador volunteered to house deported criminals in its mega-prison in exchange for a fee. (The Trump administration accepted the offer.)
Selected Migration Flows in the Western Hemisphere | Land Routes
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The forced deportation of hundreds of migrants, especially those with criminal backgrounds, could aggravate the problems that gave rise to immigration in the first place: insecurity and a lack of economic opportunity. Take El Salvador. In the 1990s, many Salvadorians fled to the U.S. during the country’s civil war. Some ended up joining gangs and criminal groups, many of whom were then sent back to El Salvador, where they increased the size and strength of criminal groups the government was already too weak to manage. Other – even most – Central American states lack the resources to absorb migrants. The returning individuals who are not criminals often arrive with few employment prospects and little to no savings. The receiving countries thus find themselves with a growing number of people susceptible to criminal activity and in need of economic assistance.
Similarly, U.S. concerns over China’s presence in Latin America are both economic and security in nature. In the early 2000s, China began to enhance its economic presence in Latin America dramatically, driven as it was to secure commodities to feed its booming economy. For Latin America, readily available Chinese capital for strategic investments only sweetened the pot. Within 20 years, Beijing replaced the U.S. as the top trade partner for many regional countries. Chinese activities in port infrastructure, telecommunications and the space industry are often dual use, raising concerns in the U.S. that they could have military applications. Washington was slow to respond partly because it had more pressing problems to deal with elsewhere and partly because it couldn’t control private business the same way Beijing could.
China’s declining economic power and domestic uncertainty have given the U.S. an opportunity to start recovering some of the ground it lost in the Western Hemisphere. China has reduced its loans, investment, and mergers and acquisitions activities in the region, while Washington has announced plans to start challenging China’s hold on port infrastructure in Latin America. During Secretary of State Marco Rubio’s visit to Guatemala in February, the U.S. announced a $125 million initiative to expand the Quetzal Port – the country’s largest, located on the Pacific coast. Explicitly meant to counter Chinese influence, the initiative will extend the existing terminal, add four new berths and accommodate larger commercial vessels.
More notable, however, is Washington's approach to Panama, particularly with regard to the canal. The U.S. is by far the biggest user and beneficiary of the Panama Canal. Its primary need is to ensure the free passage of goods; its secondary need is to prevent an external actor from establishing a presence that could threaten the free passage of goods. Though the Panamanian government controls the canal and all its operations, China has a strong presence in the country’s financial sector, as well as in the ports operating on either end of the canal. This has raised the alarm in Washington, which has turned to private business to help solve the problem. Hong Kong-based firm CK Hutchison recently sold the Panama Ports Company, which operates the primary ports of concern, to the BlackRock-TiL consortium. The consortium will own 80 percent of operations, while the remaining 20 percent will be owned by PSA, a company owned by Singapore’s sovereign wealth fund.
The Chinese government has already criticized the sale. Washington’s recent behavior – namely, its flamboyant rhetoric – has also created some pushback from the Panamanian government, which remains hawkish over its control of the canal. There doesn’t appear to be anything that would compromise passage through the canal today, but recent water shortages and U.S. activity have encouraged others to work on potential alternatives. Most notable is Nicaragua’s recently revived interest in its bicoastal canal. The proposed canal starts with the deep-water port construction at Bluefields on the Caribbean coast and includes an agreement between Chinese company CAMC and Nicaragua’s Ministry of Transport and Infrastructure. (Details of the project remain scarce).
Central America | Prospective Dry Canal Projects
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As for tariffs, Latin America is more of a casualty than a target. The logic of the tariff wars is to create leverage for the U.S. to build more favorable conditions and relationships. This plays well for the U.S. in Latin America, which lacks a strong, single institution to effectively take on Washington. This means the region’s countries tend to have competing interests and tend to negotiate on a one-on-one basis. The exposure to and potential damage from tariffs varies from country to country, with Mexico and Brazil ranking among the top. Virtually every country’s ability to negotiate better terms with the U.S. varies depending on the size of its economy, the goods in question, and the U.S. share of its market. Brazil, for example, is better positioned than most given its size, its low dependence on exports, the prevalence of commodities in exports and the market opportunities it can make available to U.S. interests. Smaller countries like Ecuador and Colombia will face greater constraints.
Tariffs have primarily affected Latin America through aluminum and steel imports. (Mexico is an exception thanks to its involvement in the USMCA.) Notably, aluminum isn’t an especially dire threat to the region since exports to the U.S. are comparatively low and, as such, won’t have much of an impact on local economies. Steel is an entirely different story. For Brazil and Mexico, steel exports are a billion-dollar industry. Some 75 percent of Mexican steel exports and just over half of Brazilian steel exports are destined for the U.S. Potential tariffs on copper exports have also worried major producers – namely Peru and Chile. Chile exports nearly 20 percent of all its copper to the United States. For Mexico and Peru, that figure is 40 percent and 27 percent, respectively.
Tariffs in this sector would inflict severe economic damage on these countries, particularly Chile and Peru, whose economies disproportionately rely on commodities exports. Many countries in the region will likely seek waivers; the first Trump administration issued waivers for steel and aluminum. Others are trying to show solidarity with the U.S. by clamping down on the dumping of Chinese goods in their domestic markets. Others, like Peru, have started sending business delegations to Washington to preempt potential tariff threats.
Leading Sources Of Steel Imports into the United States
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Leading Sources of Copper Imports into the United States
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The danger facing the U.S. on the tariff front is the unintended consequences duties may have on the domestic economies in Latin America. The countries of the region were some of the hardest hit by the COVID-19 pandemic – their economies are comparatively more dependent on physical labor, they were late to get vaccines and their governments lacked the money to support them – and they have been some of the slowest to recover. Poverty has risen, and the size of the middle class has declined. No country in the region is positioned to weather the external shock tariffs would cause. If additional restrictions are introduced on critical Latin American exports (in terms of revenue or U.S. market share), it would bring down local economies. And when this happens in Latin America, it typically generates illegal commercial activities – which, again, jeopardize regional security and stability.
Notably absent from Washington’s current focus is the “troika of tyranny,” a term coined during the first Trump administration for the anti-American, authoritarian regimes in Venezuela, Cuba and Nicaragua. Even so, there are active efforts underway to further weaken these governments, and the amount of resources dedicated to the cause varies based on regime fragility and strategic importance. The weaker the regime, the higher it ranks.
So far, Venezuela has borne the brunt of Washington’s attention – which makes sense, seeing as it’s the weakest of the three but has a lot of oil. To that end, Washington has increased sanctions and canceled Chevron’s license to operate in the country, both of which hurt Caracas’ bottom line. Cuba, meanwhile, is in a full-on economic crisis that, so far, the government has been able to manage. The Trump administration has signaled its intent to maintain a harsh stance against Cuba, as evidenced by the reinstatement of the Helms-Burton Act. (Its suspension has been a staple of U.S. foreign policy for 30 years.) It also reinstated the Cuba Restricted List, which prohibits certain transactions with companies tied to the Cuban military, intelligence or security services. (The inclusion of remittance processing company Orbit S.A. is notable given the island’s dependence on remittances from the U.S.)
Meanwhile, the U.S. has threatened to expel Nicaragua from the CAFTA-DR trade agreement, which, considering Nicaragua’s dependence on U.S. exports, would be devastating for the nation’s economy. (Fortunately for Nicaragua, this won’t happen; the agreement doesn’t have an expulsion clause, and the introduction of one would require unanimous approval.) In all three cases, the biggest risk to the U.S. is regime change. As Syria and others show, there is no guarantee that the next government will be more friendly than the last, and the instability it could usher in could be an even greater problem for Washington.
To be sure, there’s risk inherent to any foreign policy. But the U.S. has more at stake in Latin America than it does in other regions. Contained chaos and uncontested dominance of the Western Hemisphere for the past century has been the bedrock of the United States' ability to project power elsewhere. Even if Washington wants to draw down its global role, regional stability is paramount to U.S. prosperity.
