Trump brought Latin America a turnaround in US foreign policy

The US is attempting to reassert its influence in the region in order to counter China’s massive engagement. The impact this will have on European companies remains to be seen.

by Alexander Busch, Latin America correspondent for Handelsblatt and Neue Zürcher Zeitung

A year ago, Donald Trump was elected president of the US. Since then, after decades of absence, Latin America is back on Washington’s political agenda. Trump’s attitude toward Latin America is sometimes unexpectedly aggressive, then supportive again. In just a few months, for example, he has changed his stance toward individual governments, such as Venezuela and Brazil, several times.

Washington’s actions vary for each Latin American country. For some governments, such as those in Venezuela and Colombia, the increasingly hostile US stance poses an existential threat. Other presidents, such as Javier Milei in Argentina, receive massive financial and political support from the US government. Brazil and Mexico have so far responded skillfully to Trump’s provocations. However, governments such as Ecuador’s are also trying to win US support and use it for domestic political purposes.

The US government views Latin America as a sphere of influence for the US from the perspective of the Monroe Doctrine. With the Monroe Doctrine, the US declared around 200 years ago that it would control Latin America and would not tolerate any foreign powers there. This doctrine was used to justify political and military intervention in Latin American countries during the Cold War.

Trump is now taking a similar approach: he is sending naval units to patrol the Caribbean off the coast of Venezuela and shoot down suspected drug boats. He is ensuring that Chinese suppliers have to give up their positions in Panama’s ports. He is using a special fund from the Treasury Department to buy up Argentine pesos in order to stabilize the exchange rate.

This represents an abrupt change of course from the widespread neglect of Latin America by US administrations in recent decades. Especially since the failure of negotiations on a Free Trade Area of the Americas (FTAA) in 2005 due to resistance from the then predominantly left-wing governments of South America ( ), the US has largely stayed out of the region, especially politically.

China took advantage of the US absence to gain a foothold in Latin America. It is now the most important trading partner and investor in the region and has growing political influence.

Trump’s new course toward Latin America can be explained in large part by his attempt to curb China’s influence in the region. For example, the US Treasury Secretary called on Argentina to cap Chinese credit assistance in return for support measures.

Nevertheless, Trump’s tariff policy has not had a major impact on growth in Latin America so far: the region’s six most important economies are growing this year and, according to forecasts for 2026, will grow by 2 to 3 percent.

One exception is Mexico, where growth has shrunk to 0.5 percent this year. Brazil, which has been hit by the world’s highest US tariffs, has been able to divert a large part of its exports to the US to other regions of the world. This applies above all to coffee and beef.

Nevertheless, Latin America’s two most important economies are benefiting from an unexpected surge in investment by foreign companies. Brazil and Mexico rank second and fifth on the OECD list of countries that received the most foreign investment worldwide in the first half of 2025 – ahead of China and India.

It appears that corporations with multiple locations in Latin America now want to redesign their value chains from Mexico to Brazil. In addition, trade between Latin America and Mexico has increased.

However, it remains to be seen how the new US offensive in Latin America will affect European interests. Although the prospects for concluding the EU-Mercosur agreement by the end of the year appear to be good, it is unclear how much pressure the US will exert on South American member states or how much it will increase its offers to them in order to prevent such a free trade agreement from being concluded.

The new interest on the part of the US also means a changed competitive situation: until now, European companies have mainly felt competition from Chinese companies on Latin American markets, in addition to US corporations.

If US companies now re-emerge in Latin America with the backing of their government, they will automatically become stronger competitors. If Washington strategically supports certain industries (energy, raw materials), this will lead to fierce competition with Chinese companies. European corporations will then be under pressure from two sides.

The US presence should not be underestimated. Despite its two decades of political absence, the US remains a significant investor and trading partner in the region. In terms of foreign direct investment, US corporations are roughly on a par with European companies in Latin America.

However, the volume of trade with the US is significantly higher, mainly due to trade with Mexico. Total US trade with Latin America amounted to around US$365 billion in 2024. By contrast, the volume of trade between Europe and Latin America was only about half that, at around €180 billion.