Latin America economic thread

US President Donald Trump and then Mexican President Claudia Sheinbaum announced on their social media accounts that T-MEC products will be exempt from the 25% tariff until April 2, 2025. Journalists Perla Velázquez, Daniela Barragán and Alejandro López Varela analyze this agreement.

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Brazil may emerge as winner from sweeping US tariffs, economists say

Marcela Ayres
2 min read


18
By Marcela Ayres

BRASILIA (Reuters) - Sweeping U.S. tariffs could prove relatively advantageous for Brazil, Latin America's largest economy, despite President Donald Trump's move to impose a 10% levy on its exports to the United States, economists said on Thursday.

Local markets reacted positively to the highly anticipated announcement on Wednesday, with the Brazilian real strengthening past 5.60 per U.S. dollar and reaching its highest level since October 2024.

Meanwhile, the benchmark stock index edged up 0.23%, with many pointing out that Brazil's comparatively lighter tariff burden could shield it from major trade risks while also attracting capital flows shifting away from the United States.

XP's research team said Trump's tariff policy is "bad in the absolute, potentially net positive for Brazil," as a trade war could bring gains for the commodity powerhouse while also accelerating Chinese investments in infrastructure across the country and Latin America more broadly.

"During 2018-2020, amidst the China trade war, Chinese demand for commodities shifted from the U.S. to Brazil, benefiting products like soybeans and corn," said XP.

Iana Ferrao, partner and economist at BTG Pactual, said the tariff imposed on Brazil came as a relief to those fearing steeper penalties.

"As tariffs on other countries increased more sharply, certain Brazilian sectors could gain a relative competitive edge," she said.

Luis Stuhlberger, chief investment officer at Verde Asset Management, said Brazil's balanced trade relationship with Washington meant it had "highly benefited" under the worldwide tariff package.

"The question is whether Brazil will be able to seize this opportunity," he added.

Government officials from Brazil - the world's largest exporter of soy, cotton, beef, and chicken - had sought to stress that its trade relationship with the United States did not undermine the U.S. economy.

The U.S. has run a trade surplus with Brazil since 2008, reaching $253 million last year on more than $80 billion in bilateral trade.

(Reporting by Marcela Ayres; Additional reporting from Paula Laier in Sao Paulo; Editing by Joe Bavier)
 

Mexico celebrates dodging latest US tariffs but feels the effects of global economic uncertainty​

MARÍA VERZA and FABIOLA SÁNCHEZ
Updated Fri, April 4, 2025 at 6:53 AM GMT+9·4 min read

Mexico Sheinbaum​

Mexican President Claudia Sheinbaum gives her morning press conference at the National Palace in Mexico City, Wednesday, April 2, 2025. (AP Photo/Marco Ugarte)
ASSOCIATED PRESS
MEXICO CITY (AP) — Mexico celebrated Thursday having dodged the latest round of tariffs from the White House taking aim at dozens of U.S. trading partners around the world, but was also quickly reminded that in a global economy the effects of uncertainty can’t be entirely avoided.

President Claudia Sheinbaum said the free-trade agreement signed by Mexico, Canada and the U.S. during Trump’s first administration had shielded Mexico.

Now her government will focus on the existing 25% U.S. tariffs on imported autos, steel and aluminum, while accelerating domestic production to safeguard jobs and reduce imports.

“During my last call with President Trump, I said that, in the case of reciprocal tariffs, my understanding was that there wouldn’t be tariffs (on Mexico), because Mexico doesn’t place tariffs on the United States," Sheinbaum said

Economy Secretary Marcelo Ebrard noted that despite having free-trade agreements with the U.S., many countries were targeted by the tariffs U.S. President Donald Trump announced Wednesday on what he dubbed “Liberation Day.” Trump framed the tariffs as a way to bring manufacturing jobs back to the U.S.

Noting that Mexico escaped the latest round of tariffs, Ebrard said swaths of Mexican exports including agricultural products like avocados, clothing and electronics will continue to enter the U.S. without import duties.

Ebrard said it wasn't a given that the free-trade agreement would be preserved, “because in a new commercial order based on tariffs it's very hard for a free-trade agreement to survive.” The fact that it did, puts Mexico at a competitive advantage, because “it's going to be cheaper to produce in Mexico than in any other part of the world.”

Oscar Ocampo, a specialist in foreign trade at the Mexican Institute for Competitiveness, a think tank, said “the United States is closing off to the rest of the world and in relative terms closing off less with Mexico and that is an opportunity.”

Sheinbaum is seeking to use that opportunity to encourage companies producing in Mexico who had not been exporting under the free-trade agreement for various reasons to take the necessary steps to qualify. She cited major German auto producers as an example.


Qualifying for the free-trade agreement could involve anything from doing paperwork to making adjustments to the sourcing of a product.

Despite Trump's latest tariffs not being imposed on Mexico, the uncertainty they created and the interconnectedness of the North American auto supply chains meant it didn’t take long for the effects to touch Mexico.

Stellantis, maker of auto brands including Dodge and Jeep, announced that it would pause production at its assembly plant in Toluca west of Mexico City for the month of April while it assesses the tariffs' impact on its operations. The company has more than 15,000 employees in Mexico. A similar temporary production halt was scheduled for an assembly plant in Canada and some 900 workers were to be temporarily laid off across several plants in the United States.

That uncertainty is part of the reasons why Sheinbaum is pushing Plan Mexico, an initiative to promote and cultivate more domestic production.

As an example, she cited a collaboration between her government, local universities and Mexican companies Megaflux and Dina to produce electric buses for public transportation

Ebrard said recently that the buses represent not only a technological advance in Mexico, but also a “strategic decision” in favor of Mexico’s industrial sovereignty.


At a factory in Mexico City, the electric buses called Taruk — trail-runner in the Indigenous Yaqui language – are already in production. Megaflux Director General Roberto Gottfried said the company hopes to deliver some 200 by year's end.

He noted that some 70% of the Taruk's components are produced in Mexico, including its motor, but the lithium batteries that power them come from China.

In a country where one out of every three people use public transportation every day, developing this sector domestically is critical, Gottfried said.

Despite the global economic challenges presented by the uncertainty caused by tariffs, he said, Mexico’s large internal market gives the initiative a competitive advantage to develop and weather the storm.

 

Mexico Ranks 5th in 2024 Auto Output, Surpassing Germany​

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By MBN Staff | MBN staff - Fri, 04/11/2025 - 13:55

Mexico’s automotive industry ranked fifth globally in vehicle production in 2024 with a total of 4.2 million units, according to the International Organisation of Motor Vehicle Manufacturers (OICA). This marks a 5% increase compared to 2023 and places Mexico ahead of Germany and South Korea. The accomplishment is particularly notable amidst a 1% decline in global production, with total output dropping to 92.5 million units.

“Mexico outpaced Germany and South Korea by margins of 133,000 and 80,000 units, respectively,” the OICA reported. While traditional leaders in the automotive sector experienced declines, Mexico joined China, India, and Brazil as one of the few countries to report growth in output.

In the North American region, Mexico’s counterparts faced setbacks: US production declined by 1%, totaling 10.5 million units, while Canada experienced a 14% contraction. Despite these regional challenges, Mexico’s robust performance highlights its strategic advantage within the USMCA framework, reinforcing its role as a cornerstone of the North American supply chain.

Globally, China maintained its leadership in 2024, increasing production by 4% to reach 31.2 million units. The United States ranked second, followed by Japan (8.2 million units) and India (6 million units). South Korea and Germany ranked sixth and seventh, respectively, with Brazil, Spain, and Thailand completing the top ten.

Emerging economies collectively recorded a 1.7% rise in production, reaching 53.7 million units, while traditional manufacturers saw a 4.6% decline, producing 38.7 million units. Among emerging markets, India’s growth was fueled by expanding domestic demand and rising incomes, while Brazil benefited from green mobility incentives and increased investment in low-emission technologies.

Brazil attracted sizable investments, including Stellantis’ US$6 billion, Volkswagen’s US$3.2 billion, and Great Wall Motors’ US$2 billion. Although Great Wall Motors has expressed interest in Mexico, it has yet to finalize concrete investment commitments within the country.

“In January 2024, Mexico achieved its highest production levels in five years, assembling 307,069 units,” according to national industry data. Additionally, export volumes for light vehicles reached record highs.

The shift toward green vehicle manufacturing has also played a pivotal role. Over the past three years, leading OEMs, including Ford, GM, Stellantis, and Toyota, have expanded operations in Mexico to accelerate the production of electric and hybrid models.

However, challenges remain. Trade policy uncertainty and political tensions could impede sustained growth. President Donald Trump has criticized the heavy concentration of automotive manufacturing in Mexico. Additionally, S&P Global Automotive revised its North American production forecasts downward, reducing expected output by 155,000 units for 2025 and 78,000 units for 2026.

 

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