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Introduction
This report seeks to analyze the potential impact on Latin America of the economic policies likely to be pursued by the two U.S. presidential candidates, Donald Trump and Kamala Harris.
At the time of this writing, the platforms remain vague but enough can be found in the candidates’ web pages and public commentaries to draw an outline of each candidate’s policy stance. In my opinion, neither platform would be favorable to the U.S. economy, and by extension, the regional economies. Both candidates exhibit protectionist tendencies and pay scant attention, if any, to the serious fiscal challenges facing the U.S. Both approaches could lead to potentially negative consequences for LatAm trade, economic growth, inflation and the dollar. Immigration policies and trade protectionism represent the areas that could have the most negative economic effects on the region. This analysis will explore the potential impact of the candidates’ policy platforms on trade, migration flows, currencies, fiscal policy, and other key economic areas.
1. International Economic and Foreign Policy: Key Differences
Trade Policies
The scope for any new free trade agreements is completely absent from today’s U.S. economic policy agendas, implying that trade competitiveness in the LatAm region will only continue to stagnate.
Both Trump and Harris support protectionist measures, with negative consequences for the region’s exports. However, Trump has been much more vocal on tariffs, as these represent the corner stone of his economic platform. During Trump’s prior administration, import tariffs were raised across many countries, particularly targeting China. His campaign for a second term states that these tariffs would not only be re-imposed but would also be increased. He has stated that he will set them at an average rate of 20 percent, but at times he has spoken of 60 percent tariffs on Chinese imports. He has also said that he would raise tariffs on autos from Mexico and the EU and has called for a 10 percent universal tariff on all imports. All of this would have serious implications for the LatAm economies, especially those that are more open and that rely on exports to the U.S. Notably, unilateral tariffs could also undermine and even violate existing free trade agreements (FTAs). For example, Trump has threatened to impose 200 percent tariffs on products of Chinese companies setting up shop in Mexico to export to the U.S.
While Harris has not called for new tariffs, she has yet to indicate whether she would roll back those imposed during Trump’s first presidency and kept in place under President Biden.
The impact of trade protectionism on Latin America:
- Higher tariffs would likely slow growth and increase inflation in the U.S. In varying degrees, this would spill on to LatAm inflation and activity. That said, increased tariffs on Chinese exports could represent opportunities for LatAm to increase its exports to the U.S. For example, Mexico has seen its share of manufacturing exports rise in the U.S. as the Chinese share has declined.
- Importantly, increased U.S. tariffs could undermine existing free trade agreements such as the USMCA, and the bilateral accords with Chile, Colombia, and Peru. This would not only damage the image of the U.S. as a reliable trading partner, but also lead to lower trade volumes and higher costs for businesses operating under these agreements. LatAm countries may respond with retaliatory tariffs and/or seek dispute resolutions through mechanisms established in the FTAs, such as international arbitration, or the WTO. This would escalate trade tensions, legal frictions, and lead to a deterioration in bilateral relations.
- Countries may even push for renegotiations within existing FTAs to mitigate the impact of U.S. tariffs, potentially leading to more stringent rules of origin or greater market access demands.
- Increased tariffs would particularly harm sectors like agriculture, textiles, and the automotive industries in countries such as Mexico, which rely heavily on exports to the U.S. under FTAs. In the case of Mexico, there is a mandated review of the USMCA in 2026, and any additional tariffs would have important implications for that review. (Trump already renegotiated parts of the USMCA during his time in office. He, more than Harris, is likely to underestimate the negative impact of higher tariffs on the U.S. consumer and overall productivity of the U.S. and North American economy.)
- Finally, there is the question of imports of critical materials such as lithium, copper and manganese, all of which are exported to the U.S. and have been part of U.S. efforts to move supply chains away from China and advance electrification. Argentina has been a large source of U.S. lithium, but the country has no FTA with the U.S. Would a Trump administration place tariffs on critical materials?
Immigration Policies
Trump’s plan for mass deportations could lead to stagflationary pressures by shrinking the U.S. labor force – particularly in sectors where immigrant labor plays a critical role – and wage inflation as labor becomes scarcer. The implementation of a program of deportation of possibly millions of undocumented migrants would pose monumental legal, logistical and ethical challenges. Beyond the domestic political and economic consequences, the return of masses of migrants would severely disrupt LatAm economies, particularly those of Mexico, Central America, and the Caribbean, as these economies struggle to absorb waves of returning migrants and as remittances from the U.S., which represent a major economic driver for some of the regional economies, dry up. (In 2023, remittances made up 4.2 percent of Mexico’s GDP, with over $63 billion being sent from abroad, primarily from the U.S. This represents a vital source of income for millions of families and significantly supports domestic consumption. In other cases, such as Honduras, remittances from the U.S. accounted for an astounding 28 percent of GDP in 2023.) Returning migrants would flood labor markets, creating stress and market dislocations. Reduced remittance flows would constrain household consumption and investment in LatAm. It is possible that countries such as Mexico would respond by lowering cooperation with the U.S. on the war on drugs and retaliate with trade tariffs of their own.
Harris, by contrast, opposes mass deportations, but is likely to place more restrictions on border crossings, leading to a downward trend in immigration entries.
- Implementation will depend on whether a second Trump administration would have control of Congress or whether there is a divided legislature. With control of Congress, immigration policy under a new Trump administration would clearly be more draconian.
Currency Policy
Trump has said he favors a weaker dollar, potentially reversing the strong-dollar policy which for decades has been a feature of U.S. economic policy. While short of interfering with the independence of the Federal Reserve, it is difficult to see how his administration would engineer a concerted weakening of the U.S. dollar. A more likely scenario is that the markets grow concerned with the large expected fiscal deficits which would likely follow the tax cuts his platform predicates. This could help accelerate the loss of status of the U.S. dollar as the global reserve currency of choice. (Trump has threatened to penalize any country that tries to de-dollarize with 100 percent tariffs.) Harris has not outlined a clear stance on the dollar but her less fiscally destructive fiscal plan would likely favor a stronger dollar relative to Trump’s plan.
A weaker dollar under Trump would have mixed implications for LatAm economies: it may help control inflation in the region and reduce the cost of servicing the U.S. dollar-denominated debt of countries and the private sector but would also reduce the value of the region’s exports. Perhaps more important, it would dampen commodity prices, on which many LatAm economies depend. But the bottom line is that both administrations will have very limited direct influence on the currency markets.
2. Domestic Economic Policies and Their External Implications
Fiscal and Tax Policies
Both Trump and Harris are expected to maintain relatively expansionary fiscal policies, although Harris’s policies are likely to be less worrisome than Trump’s. Much will depend on whether the incoming administration is working with a divided Congress or there is single-party control of Congress. The largest looming fiscal issue is the expiration in 2025 of the individual tax cuts enacted by Trump in 2017. A Harris administration is likely to let some of those tax cuts expire, especially ones on higher-income individuals, whereas a Trump administration would likely renew all of them.
Harris has recently sought to present herself as more business-friendly than the outgoing Biden administration, proposing a lower increase in capital gains taxes compared to Biden, but an increase, nonetheless. Her platform, involving an increase in the top capital gains tax rate (from 20 percent to 28 percent) and raising taxes on higher-income individuals via the expiration of the above-mentioned tax cuts, would seem to imply a tighter fiscal stance. However, Harris also supports multiple spending and credit programs. Beyond the renewal of the 2017 individual tax cuts, Trump’s platform features many other fiscal proposals, all of them involving tax cuts of one form or another, which essentially are expansionary for the economy in the near term, but fiscally negative.
With the U.S. budget deficit now in the 6 to 7 percent of GDP level, significantly loose fiscal policies, are likely to be inflationary, ultimately requiring an offset in the form of a tight monetary policy response, which in turn would eliminate the short-term benefits of stronger growth.
The impact of the candidates proposed fiscal and tax policies on the LatAm economies is mixed and, in the end, probably not large. Economic activity in the region would initially benefit from a loose U.S. fiscal policy, but ultimately this would necessitate tighter monetary policy in the U.S. to contain inflation, implying higher U.S. interest rates, which would be negative for LatAm growth and financing.
Price Controls
One of the more controversial elements of Harris’s economic platform is her willingness to implement selective price controls (for so-called “price gouging”) on corporations that raise food and groceries by what her administration would deem exploitative levels. While the objective is to address ongoing inflationary pressures, these types of measures by and large lead to market distortions, that stifle business confidence and growth. At the margin, the slower U.S. growth resulting from any price-control policies would reduce demand for LatAm exports, hampering the region’s economic performance, but the impact on the region of such policies would likely be minimal.
Industrial Policy
Both Trump and Harris are expected to continue pursuing industrial policies that prioritize U.S. economic self-sufficiency. Trump’s focus on fossil fuels contrasts with Harris’s support for green energy, reflecting their broader divergence on climate and energy policy.Harris’s green transition focus could increase LatAm opportunities in renewable energy markets, particularly those of countries such as Brazil and Chile. On the other hand, Trump’s emphasis on fossil fuels would benefit LatAm oil exporters such as Colombia, and Venezuela, but at the expense of longer-term sustainability goals.
Conclusion
The economic platforms of both Donald Trump and Kamala Harris present challenges for Latin America, with differing implications depending on the country and the sector. Key to the feasibility of all the promises and threats from both sides will be the composition of Congress. Trade tariffs on U.S. imports and the implications of harsh measures on immigration appear to be the areas that may have the biggest influence on the LatAm economies, especially if plans for mass deportations are enacted. Ongoing loose fiscal policy, tax, industrial and dollar policies, as well as price controls on price gougers, may lead to reduced growth, higher inflation, and increased economic volatility across the region, but are likely to have much less of an impact. A Trump administration would likely increase these risks. However, Harris’ distrust of market mechanisms, corporate tax increase proposals and her seemingly low concern for the need to rein in fiscal deficits could create a more hostile environment for corporate America and U.S. financial markets with knock on effects on the region.
Tulio Vera is the President and CEO of Global Americans. The author would like to thank Juan Diego Solis de Ovando Bitar and Jorge Mariscal for their feedback in drafting this article.
Global Americans takes pride in serving as a platform that offers in-depth analyses on various political, economic, environmental, and foreign affairs issues in the Western Hemisphere. The views and opinions expressed in this article are solely those of the author and do not necessarily reflect the views of Global Americans or anyone associated with it, and publication by Global Americans does not constitute an endorsement of all or any part of the views expressed.
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