The truth is that many in Brazil, particularly the business community, would benefit from a trade war—but one specifically between China and the U.S. Industries like textiles, apparel, cement, iron ore, steel, car parts, aircraft parts, and commodity producers all stand to gain if the U.S. imposes tariffs on Chinese goods.
This scenario would be a boon for Brazil, Argentina, and the rest of Latin America. Analysis of trade data reveals over $200 billion worth of products that U.S. companies could potentially source from Latin America instead of China.
In the machinery and appliances alone (industrial machinery, washing machines, refrigerators, and other appliances), the U.S. imports over $37 billion worth of products from China. Brazil is well-positioned to capture a significant portion of this market share if a trade war shifts production away from China. Brazil has manufacturing facilities for major brands like Whirlpool, Samsung, Electrolux, Midea, Panasonic, and LG, plus ten other smaller brands.
If Brazil were to capture even 50% of the shifted production, it would generate nearly $18 billion in new sales. These companies also have manufacturing presence in Argentina, meaning that a similar shift could significantly boost Argentina’s economy and potentially resolve its issues with the International Monetary Fund (IMF), also a shift would eradicate the usage of Chinese currency within Argentina, as more sales to the United States would improve dollar circulation.
Textiles, garments, apparel, and shoes represent another $30 billion in imports from China. Latin American countries, particularly Colombia and Peru, with their established textile and apparel industries, stand to benefit greatly from even a small shift in orders away from China.
Over the last forty years, Brazil has transitioned from a largely self-sufficient nation to one heavily reliant on imports.
Argentina faces a more dire situation, with a public emergency declared due to economic mismanagement by previous administrations. The country’s foreign exchange reserves are critically low, hindering its ability to secure essential imports. The government has resorted to printing money to pay salaries, leading to job losses and rampant inflation.
President Milei is attempting to address these issues, but faces significant challenges. His austerity measures threaten the interests of politicians and union leaders who have benefited from the status quo and corruption.
However, a surge in exports could provide a solution. If Argentina could increase its exports to the U.S. by $20 billion annually, the influx of dollars into the central bank would be a lifeline. The government could then convert these dollars into pesos to fund public services, pay salaries, and subsidize export-oriented industries. This would create a $20 billion annual surplus in U.S. dollar reserves.
While President Milei has advocated for dollarization, this approach may not be ideal. If everyone holds dollars, the Argentine government would lose control over its monetary policy and be deprived of vital reserves.
China offers a potential model: they accumulate dollar reserves, which the government then uses to lend out money in yuan. This allows China to maintain control over its currency, using its vast dollar reserves to manipulate the yuan’s value by buying yuan when it weakens and selling it when it strengthens. This strategy gives China significant leverage in international markets.
Similarly, Argentina could heavily subsidize the construction of new manufacturing facilities by funding them in pesos instead of dollars, as long as most of the steal and construction material came from within Argentina. This strategy would simultaneously boost exports and allow the government to pay off its international debt.
Brazil, on the other hand, would be able to balance its fiscal budget, generate new tax revenue due to increased employment, and increased money gyration domestically and reduce its reliance on imports from China by manufacturing those products domestically.
The media often portrays certain political figures negatively, suggesting they will be detrimental to the world. However, the core issue is not any individual politician, but rather China’s dominance in light manufacturing. This dominance has negatively impacted Latin America and Brazil over the past forty years, leading to significant job losses in the manufacturing sector. It is puzzling why Latin American countries are aligning themselves with China, given the detrimental effects on their manufacturing industries.
China crippled the manufacturing sectors of many countries, then positioned itself as a savior by offering trade deals and buying up their raw materials like corn, soybeans, and iron ore.
Numerous countries, including Malaysia, Indonesia, Brazil, Argentina, Colombia, Peru, Ecuador, the Philippines, Thailand, Cambodia, Laos, Chile, Turkey, Mexico, and India, have compelling reasons to support the United States in its efforts to rebalance trade with China. These countries stand to gain over $300 billion in potential economic benefits. This rebalancing would not only facilitate re-industrialization and create millions of new jobs, but also foster greater economic independence and reduce reliance on cheap imports from China.
What does the United States gain? The benefits are clear. When the U.S. trades with China, the relationship is often imbalanced, with China frequently exploiting the situation to its advantage, with a massive trade surplus to China. However, when the U.S. engages in trade with other nations, particularly those mentioned earlier, these countries tend to reciprocate and purchase American goods and services in return. This fosters a more equitable and mutually beneficial trading relationship.
