Los Grobo in the Media

April 23, 2018
Fears of a commercial war between the United States and China
LIMA, Peru - One of the things that caught my attention at the 8th Summit of the Americas that concluded this Saturday was a topic that was not on the agenda, but was very present in the private conversations among heads of state: fear to the impact that a commercial war between the United States and China could cause in the region.

Threats of President Trump's trade tariffs on China could cause serious damage to Latin American economies, according to several senior officials, business leaders and economists.

The summit focused on the joint efforts of the United States and Latin America to reduce corruption, and the crisis in Venezuela.

But the cancellation of Trump's participation in the summit, at the last minute, fell like a bucket of cold water and caused some heads of state to cancel or shorten their visits. Trump was the first president of the United States not to participate in these regional summits in almost 25 years, and the first in recent memory that has not set foot in Latin America during his first year in office.

The White House said Trump needed to stay in Washington to monitor the situation in Syria, but few here took that excuse seriously. In 2011, President Obama launched an attack on Libya while visiting Brazil and several other US presidents have handled foreign crises while traveling.

Before the summit, some analysts had speculated that a trade war between the United States and China could benefit Latin America, because it would create more export opportunities for Latin America. However, Alejandro Werner, the regional director of the International Monetary Fund, told me that a trade war would depress the world economy and reduce the demand for Latin American exports. "There are no winners and losers in a commercial war," Werner said.

Mexico and Central America would be harmed by the high dependence of their exports on the US market, as well as by a possible drop in family remittances and tourism in the United States. And the South American countries, which export mainly raw materials, would suffer a slowdown in demand from China, which would depress world prices of commodities.

In addition, the mere threat of a trade war is already creating uncertainty and could inhibit investments in many industries, in addition to those that have already been subject to tariff threats.

"If you are the CEO of an industry that has not been affected by the rates but could be affected in the future, you could stop your investment plans," Werner told me.

Fears of a trade war between the United States and China have skyrocketed since March 9, when Trump announced it would impose tariffs of 25% on steel imports and 10% on aluminum imports. Since then, the United States and China have escalated the stakes several times, threatening to put tariffs on more than 1400 products from both countries, including US soybean exports to China.

Gustavo Grobocopatel, one of the main exporters of soy from Argentina who spoke to several presidents during the summit on the challenges of the agro-industrial sector of Latin America, told me that China's tariffs on US soybeans would not help Latin America. On the contrary, they would create a lack of certainty and volatility in the markets.

"In the short term, it would hurt the United States more, but in the long run it would hurt us all," Grobocopatel told me.

Trump's erratic trade policies are a major concern for Latin American presidents. Trump retired last year from the Trans-Pacific Partnership Agreement of 12 Asian and Latin American nations. But last week, he said he may want to rejoin that agreement.

Something similar happens with the North American Free Trade Agreement with Mexico and Canada. Trump says one day that he wants to get out of that treaty and the next day he says he wants to stay if he negotiates again to his liking.

Seeing things from this regional summit, it seems that the world is upside down: the United States is the populist country, anti-free trade, unpredictable and unreliable, while the largest countries in Latin America seem the voices of sanity. Who could have said it!

Publisehd by:
Diario La Nación (Argentina). By Andrés Oppenheimer.
Automatic translation from spanish.

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