Trump and Latin America: Trade

On February 1, Trump began fulfilling his campaign promise to impose 25 percent tariffs on the United States’ North American neighbors and closest trade partners, Canada and Mexico. Canada’s energy sector would face 10 percent tariffs.These tariffs were set to become effective on February 4.

To impose these tariffs, Trump used the International Emergency Economic Powers Act (IEEPA), a law giving the U.S. president additional economic authorities if a national emergency is declared in the face of an “unusual and extraordinary threat.” Trump declared a national emergency at the southern border on January 20, due to illegal immigration and the flow of drugs into the United States, and expanded that to include the northern border on February 1. 

“IEEPA has never been used before in this manner,” said Eric Farnsworth, AS/COA's vice president. “It's a striking departure from traditional U.S. trade policy, as it dramatically expands the definition of national security emergency while using economic tools to promote non-economic priorities.”

Both Mexican President Claudia Sheinbaum and Canadian Prime Minister Justin Trudeau responded with threats of retaliatory measures. Trudeau announced Canada would place 25 percent sanctions on the United States, affecting $107 billion of U.S. goods. The brunt of those sanctions would take effect in 21 days. Sanctions would target sectors like U.S. alcohol, fruits, appliances, clothing, and sports equipment. Non-tariff measures on procurement and critical minerals were also considered. 

Sheinbaum, who had earlier expressed skepticism that Trump would follow through on his threat, said if he did, Mexico would implement retaliatory sanctions and other measures, which she deemed as Plan B. She did not specify the contents of the plan. Sheinbaum and Mexico’s governors all rebuked Trump’s assertion of the link between Mexico’s government and drug cartels. 

On February 3, Trump held separate telephone conferences with Mexican President Claudia Sheinbaum and Canadian Prime Minister Justin Trudeau over the sanctions. After each, Trump delayed the sanctions for one month.

The sanctions on Mexico were the first to be delayed. Sheinbaum agreed to staff 10,000 troops of the Mexican National Guard to the border. Trump and Sheinbaum agreed to two high-level working groups, one on security and one on trade. Sheinbaum mentioned there was an agreement made over weapons trafficking. The Mexican president’s action echoed moves taken by her predecessor, Andrés Manuel López Obrador. Back in 2019, he sent National Guard troops to Mexico’s border with Guatemala after pressure from Trump over migration.

Trudeau and Trump agreed to the continued implementation of a $900 million border security plan, which includes the use of drones, helicopters, and 10,000 personnel. Trudeau also announced he would redouble efforts to defeat the opioid crisis. That includes $140 million for intelligence gathering around cartels. 

Markets opened the week on February 3 reacting to the tariffs with U.S. stocks hitting their lowest level since the start of Trump’s presidency. Regarding the possibility of tariffs coming into effect, AS/COA President and CEO Susan Segal said, “My own view on tariffs is that they inhibit trade and trade is good. I believe that implementing tariffs would impact all three economies.” “It is in the interest of the United States, Mexico, and Canada for us all to sit down as neighbors and friends and find a path forward that preserves everything that we've worked on creating over these number of years.”

Secretary of State Marco Rubio traveled to Panama from February 1 to 3, amid Trump’s threats to “take back” the Panama Canal, due to his concern about Chinese influence on the waterway. On February 2, Panamanian President José Raúl Mulino, who has strongly rejected Trump’s claims, received Rubio at the Palacio de las Garzas for a meeting.

After the meeting, Mulino noted that he understood Trump’s concern had to do “more around the ports than around the Panama Canal per se,” referring to two ports, which are managed by a subsidiary of CK Hutchison Holdings, a Hong Kong-based conglomerate. Mulino said Panama’s Comptroller General is currently auditing these concessions, so he will wait for the results of the audit and act accordingly. The Comptroller General of Panama said that the company has not paid “a dollar” to Panama in three years for the ports.

In a press release, the U.S. Department of State said that Rubio informed Mulino the United States believes the current administration of the canal represents a violation of the “Neutrality Treaty,” one of the documents signed at the transfer of the canal. If “immediate changes” did not occur, the United States would “take measures necessary to protect its rights under the Treaty.” 

Mulino announced that he will not renew Panama’s signature in China’s Belt and Road Initiative, a development and trade project where Beijing funds foreign infrastructure projects. Rubio called this move “a great step forward for U.S.-Panama relations.” 

Later that day, Rubio visited the Panama Canal and met with its Administrator Ricaurte Vásquez. Trump has claimed the United States is being “ripped off at the Panama Canal,” though U.S. vessels pay the same universal rates to cross it. The Panama Canal Authority told Rubio it was willing to “optimize transit priority of U.S. Navy vessels” through the canal. On February 5, the U.S. Department of State announced that U.S. government vessels could now transit the canal without paying any fees. The Panama Canal Authority denied having made any adjustments to their fees. 

Mulino also offered the United States an airstrip in Darien province, a key passageway in hemispheric migration, for migrant repatriation flights. On February 3, Rubio visited the Marcos A. Gelabert international airport in Panama to witness the repatriation flight of 43 Colombian migrants, which he called “a powerful example of the strength of the U.S.-Panama partnership.” 

Just hours after he was sworn in for his second term as president, Trump signed a series of executive orders. One of these executive orders was exclusively dedicated to his trade approach, titled “America First Trade Policy.” 

In this executive order, Trump specifically referred to the United States-Mexico-Canada Agreement (USMCA), instructing the U.S. Trade Representative to start the public consultation process for the 2026 review of the agreement early, as well as “assess the [USMCA’s] impact on American workers” and “make recommendations regarding the United States’ participation in the agreement.” 

The order also mentioned China, a country that was largely missing from the president’s inaugural address, directing the U.S. Trade Representative to also review a trade framework between the two countries and consider tariffs and sanctions if needed. On February 4, an additional 10 percent tariff on Chinese imports went into effect. 

Trump also signed an executive order titled “Unleashing American Energy,” in which, among other policies, he calls for the elimination of electric vehicle (EV) incentives, as well as the termination of government measures that disincentivize the sale of non-electric vehicles. Former President Joe Biden’s goal was for half of all new cars sold in the United States to be electric vehicles by the year 2030. In 2024, Mexico exported over $3 billion in electric vehicles to the United States. 

In addition to threatening tariffs on Mexico and Canada, Trump showed his willingness to use tariffs as a bargain too. On January 26, Trump and Colombian President Gustavo Petro engaged in a dispute, when Petro refused previously agreed on U.S. military planes carrying Colombian deportees to land in Bogota. Trump’s response? The threat of 25 percent tariffs on Colombian goods, which he would raise to 50 percent a few days later if they did not accept the deportees, as well as other measures like suspending visas for the Colombian government and ordering stricter customs inspections of all Colombians. 

After 12 hours, during which Petro first responded with retaliatory tariffs, the Colombian leader agreed to Trump’s terms. The White House press secretary Karoline Leavitt wrote that the tariffs “will be held in reserve, and not signed, unless Colombia fails to honor this agreement.” On January 28, two Colombian government planes landed in Bogota with the deportees.

Imposing tariffs on other countries to implement an “American First” vision was a promise Trump repeated during his presidential campaign, echoing actions from his first term. “We will cut your taxes, end inflation, slash your prices, raise your wages, and bring thousands of factories back to America... a lot of it will be using my favorite word, tariff,” he said during his last campaign rally. 

Trump threatened to impose 10 to 20 percent global tariffs on all goods coming into the United States. In addition to the 25 percent tariffs on Canada and Mexico, he also proposed higher tariffs, as much as 60 percent, on Chinese imports. Trump threatened the BRICS bloc, which includes Brazil, with a 100 percent tariff if they created their own currency.

During his first term, Trump also leveraged tariffs on goods coming into the United States. That included a 25 percent tariff on steel and 10 percent tariff on aluminum in 2018. The original order exempted Argentina, Brazil, Canada, and Mexico. However, the tariffs were eventually imposed on Canada and Mexico. After a back-and-forth where the two countries imposed retaliatory measures on some imports from the United States, all measures were lifted. He threatened tariffs on other Mexican products, like automobiles, and a blanket tariff on the country over his frustrations on migration, but did not follow through on either.

During his first term, Trump negotiated USMCA, which replaced the North American Free Trade Agreement (NAFTA). “The USMCA is the fairest, most balanced, and beneficial trade agreement we have ever signed into law,” Trump said of the deal, which entered into force in 2020. The agreement includes stronger protections for the North American automobile industry, as well as for U.S. intellectual property, and seeks to benefit small and medium businesses, among other points. The USMCA is up for revision in 2026.

In 2019, Trump’s government launched the America Crece program, a government initiative that supported U.S. private sector investment in infrastructure and energy projects in Latin America and the Caribbean.

In 2017, newly inaugurated Trump withdrew the United States from the Trans-Pacific Partnership, a free trade deal signed by former President Barack Obama in 2016 with eleven other nations including Chile, Mexico, and Peru.