What Donald Trump's return means for Latin America

[Judi Lynn]

The topics he cares about—immigration, trade and drugs—put the region in the crosshairs

Nov 20th 2024|MEXICO CITY

By Sarah Birke, Bureau chief for Mexico, Central America and the Caribbean, The Economist

Donald Trump’s decisive victory in the United States was met with trepidation across most of Latin America. And with good reason: the impact of his return to the White House in 2025 will be felt across the region. Mr Trump may not have mentioned Latin America much during the campaign, with the exception of Mexico, which he regularly bashed. But the main topics he cares about—illegal immigration, trade imbalances and drugs—put the Americas in the crosshairs. And Marco Rubio, Mr Trump’s pick for secretary of state, cares more about the region than many: he is the son of Cuban immigrants.

The first challenge will be Mr Trump’s plans for dealing with migrants. The vast majority of the millions of people Mr Trump says he wants to deport are Latin Americans: of the estimated 11m people residing in the United States illegally, over 4m are Mexican, 2m are from Central America, over 800,000 from South America and 400,000 from the Caribbean. Latin American countries would struggle to absorb them. And their economies would take a big hit from the loss of remittances, which make up 20-25% of GDP in El Salvador, Guatemala and Honduras.

Mr Trump wants firms to reshore to the United States, rather than nearshore

Latin Americans also accounted for the vast majority of the 2.1m encounters at the southern border in 2023. To reduce that number, Mr Trump is likely to bring back some of his policies, such as trying to strong-arm other countries into accepting asylum seekers, cracking down on migrants to deter them or, in the case of Mexico, making them wait on their side of the border. Given that the root causes of migration remain (see next article), this could cause chaos.

Mexico, now the largest trading partner of the United States, will be the country most affected by Mr Trump in other ways, too. He has threatened to impose tariffs on day one, in part to reduce his country’s trade imbalance with Mexico, which was $159bn in 2023. Mr Trump is also unhappy about car factories in Mexico, and Chinese investments. Mexico says it would hit back with its own tariffs, which would cause a costly trade war. All this could blow up the United States-Mexico-Canada Free Trade Agreement (USMCA) which Mr Trump himself negotiated during his first presidency. Cool heads may prevail: North America’s economies are deeply integrated and any disruption would hurt them all. Mr Trump may consider a review of USMCA, due in 2026, as a chance to make deals.

His return may also put the kibosh on nearshoring, which many of the region’s countries are betting on to juice their sluggish economies. Mexico had hoped to be the main benefactor of efforts by companies in the United States to decouple from China, a policy Mr Trump pushed in his first term that was bolstered by supply-chain disruptions caused by the pandemic and Russia’s invasion of Ukraine. But Mr Trump wants firms to reshore to the United States, rather than to nearshore. This would reverberate beyond Mexico, to Chile and Costa Rica, among other countries.

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