Latin America Braces for US Election Impact on Trade, Tariffs

• Latin America is anxiously counting the days to Nov. 5, when U.S. voters will choose between relative continuity under Vice President Kamala Harris or a return to policies that triggered volatility in the region's largest markets and economies under former president Donald Trump.
• Trade and tariffs, as well as monetary policy's effect on global interest rates, are likely the largest avenues for the election to jolt the U.S.'s neighbouring region. Washington's economic war with China could particularly rock Mexico and boost Brazil, especially in a tit-for-tat scenario.
• On a broader level, a Trump victory would likely send shockwaves through the region, potentially putting the squeeze on some currencies and central banks even as countries that are more tied to commodities or trade with China could emerge largely unscathed.
• While the Biden administration did not roll back tariffs imposed by Trump on China, Harris' plan to keep them roughly as they are makes her a dove toward the world's No. 2 economy. Under Trump, tariffs on Chinese products would jump to around 60%.
• South American countries may be better positioned to dodge a stricter U.S. trade regime. In a recent client note from Lazard, the investment bank placed copper and lithium powerhouse Chile on a list of countries with high exposure to the US market that could be largely spared based on the less replaceable nature of their exports.
• Such calculations would become much less relevant in the case of a Harris victory. "If the Democratic candidate Vice President Kamala Harris wins, likely with a divided government, tariff risk would likely decline and we would expect lower growth and investment conditions in the United States, which could lead to sustained outperformance of EM assets," the investment bank said in its October outlook for emerging markets, published recently.

(Source: Reuters)