Donald Trump’s America First Trade Policy Memo: His Trade Policy 2.0

Source: CID-Prospects

Donald Trump’s America First Trade Policy Memo: His Trade Policy 2.0.

A few key takeaways:

· These protectionist policies, to close space to China, will not necessarily generate the desired nearshoring desired to the United States or the rest of the American hemisphere.

· On the contrary, they would further motivate U.S. companies to look for alternatives outside China, for example, Indonesia or Vietnam.

· Latin American exporting companies should prepare for an increase in trade defense measures, both tariff and non-tariff.

· Companies should focus on constant monitoring of U.S. trade policies and adjust their export strategies as changes are implemented.

· Market diversification must be a priority: Latin America cannot continue to rely exclusively on the U.S. as its main trading partner.

· Markets in Asia, Europe and Africa also offer opportunities for expansion, which companies should actively explore.

Intro

With Donald Trump’s return to the U.S. presidency on January 20, 2025, his well-known “America First Trade Policy” has been reinforced with an even more protectionist approach. This vision seeks to prioritize U.S. economic interests through tighter trade barriers, revisions and renegotiations of Free Trade Agreements (FTAs), including the WTO, more aggressive trade remedies measures, national security measures, for technology and intellectual property, treatment of China, steel and aluminum, even fentanyl and migration. Despite the challenges that this policy poses for Latin American exporting/importing companies, there are also opportunities to adapt to the new global trade order that Trump is proposing.

“America First Trade Policy” and the Reinforcement of Protectionism

The core of Trump’s trade strategy is straightforward: pursue U.S. economic self-sufficiency, reduce trade deficits, and safeguard domestic industry.To achieve these objectives, his administration has announced measures such as tariffs, quotas, and trade restrictions, particularly on imported goods that compete with domestic production.

In practice, this translates into a strengthening of trade remedies measures, such as antidumping and countervailing duties, designed to protect U.S. producers from what they consider to be unfair trade practices. This approach not only directly affects economies that compete with the U.S., but also alters global trade flows by generating trade detours through circumvention of these measures.

The new trade policy will have implications for Latin America, where trade with the United States is crucial. In key sectors such as agriculture, mining, and manufacturing, tariffs and import restrictions may make Latin American products more expensive in the U.S. market, diminishing their competitiveness. However, companies in the region must be prepared to face this reality and adapt quickly.

Indonesia and Vietnam as Alternatives to the U.S.-China Trade War

One of the most interesting phenomena that CID-Pro Consulting believes would be accentuated by this “America First Trade Policy” is the potential for trade diversions/relocations, especially as a result of trade tensions between the U.S. and China. Trump’s protectionist policies, designed to restrict Chinese market access, are unlikely to result in the anticipated nearshoring to the United States or other markets within this hemisphere. Instead, it is anticipated that these policies will spur U.S. companies to explore alternative sourcing destinations, particularly in Southeast Asian countries with favorable economic, trade, and investment conditions, such as Indonesia and Vietnam.

This shift in trade patterns presents new opportunities for Latin American exporters, who may see expanded markets and the potential to benefit from changes in trade value chains.

In terms of Indonesia, the young population and emerging middle class have led to a substantial labor force and consumer base. As a result, it has emerged as a prime location in Southeast Asia for investment and export development.

Vietnam, on the other hand, boasts a sizable and expanding consumer market, supported by a dynamic and skilled workforce. Vietnam has attracted significant investment and has increased its presence in global markets.

Latin American companies must be mindful of these changes in the global supply chain and adapt their strategies to seize opportunities that arise.

Renegotiating Free Trade Agreements (FTAs): New Opportunities for Latin America

A key aspect of Trump’s trade policy will be the renegotiation of bilateral trade agreements. While the Trump administration has demonstrated a preference for more restrictive agreements and reduced multilateralism, the renegotiation of FTAs may present a means for Latin American companies to secure enhanced access to the U.S. market.

Colombia and other countries in the region should prepare for these renegotiations. Companies should advocate for clauses that allow them to benefit from greater competitiveness in strategic sectors such as agriculture, mining, and energy. Additionally, Trump’s emphasis on bilateral agreements has the potential to grant preferential access to key markets for countries with strong trade ties to the U.S., provided they can negotiate specific agreements that align their interests.

The key to success will be an active and multidirectional commercial diplomacy that not only seeks the revalidation of existing FTAs, such as the one with the United States, but also the opening of new markets, e.g., in Asia, through more personalized agreements that favor key sectors of the Latin American economy.

Trade Remedies Measures: Predictable Increase

In light of a more protectionist U.S., Latin American exporting companies should prepare for an increase in trade remedies measures, both tariff and non-tariff. Trade barriers beyond tariffs, such as anti-dumping measures, import quotas, and technical regulations, may become significant obstacles to Latin American exports.

The U.S. government may choose to implement these measures to protect its key industries, which could result in an increase in the price of Latin American products and, consequently, a loss of competitiveness in the U.S. market.In response, Latin American governments may adopt more trade defense measures against unfair trade practices from China by invoking World Trade Organization (WTO) rules.

In this context, companies will need to focus on constant monitoring of U.S. trade policies and adjust their export strategies as changes are implemented. This includes adapting to new regulatory standards, reviewing production costs, and exploring new trade routes to reduce dependence on the US market.

Opportunities in Diversification and Innovation

The “America First Trade Policy” poses a clear challenge for Latin American exporters, but it also creates new opportunities for those who make strategic decisions. Market diversification should be a priority: Latin America must consider alternative trading partners beyond the U.S. There are significant opportunities for expansion in markets in Asia, Europe, and Africa, and companies must proactively explore these opportunities.

Innovation will also be essential. To overcome the barriers imposed on Latin American products, companies must enhance their competitiveness in terms of quality and technology. This will require increased use of trade finance as a leverage tool to invest in process modernization, product improvement, and new lines of business. The primary challenge lies in maintaining competitiveness, not only in the U.S. market but also in global markets.

Conclusions

Trump’s return to the White House with his renewed “America First Trade Policy” marks a significant shift in international trade relations. Companies in Colombia and Latin America must navigate a complex landscape of tariffs, trade barriers, and new Free Trade Agreement (FTA) negotiations. However, these companies also have the opportunity to adapt, diversify their markets, and take advantage of the global trade detour.

To seize these opportunities, it is essential for companies to implement a comprehensive strategy that incorporates market diversification, product innovation, and the proactive protection of commercial interests through active commercial diplomacy. This comprehensive approach will be essential for Latin American companies to thrive in today’s increasingly complex and competitive global environment.

The key to thriving in this new global order is to anticipate, adapt, and seize the opportunities that arise in a multipolar world.

At CID-Pro, we are thrilled to help our clients navigate this complex environment by providing strategic analysis and solutions tailored to their needs.