Trump is already losing the trade war with China in South America

The incoming Donald Trump White House is already losing a trade war with China in the South American copper giant Peru. This is part of a larger power realignment in the resource-rich region near Washington.

Peru, the second largest copper exporter in the world, is set to host leaders of Asia-Pacific Economic Cooperation this week. China's President Xi Jinping will attend and inaugurate a major new Chinese-built port in Peru. The world's No. 2 copper exporter is hosting leaders of the Asia-Pacific Economic Cooperation this week. China's president Xi Jinping will attend and officially inaugurate a new port built by China in Peru. Joe Biden, the outgoing U.S. president, is also invited.

Peru is a microcosm of broader challenges facing the White House in South America. China has been gaining ground rapidly, thanks to its appetite for South America's major exports, including corn, beef, copper, soybeans, and lithium-containing battery metals.

This has made Beijing the preferred trade partner for countries from Brazil to Chile and Argentina. Washington's regional influence is being eroded by this trend, which was accelerated under Trump's "America First" policy during his first term and again under Biden.

Li Xing is a professor at the Guangdong Institute for International Strategies. He said that the strategic value of this region is that it is in the backyard of the United States. It also helped to counter U.S. Presence around the Indo-Pacific, and offset trade war risk.

"China cannot build military bases in the Middle East because it is too sensitive, and would make China's conflict against the United States more pronounced. It has first made progress with economic ties."

Peru is a good example of this dramatic change. UN Comtrade data shows that China's lead in trade with the United States increased to $16.3 billion a year ago, a dramatic shift from just a decade earlier when Washington was dominant. This has been accompanied by investment in everything from mining to energy.

China overtook America in 2015 for trade with Peru. The gap widened under Trump's former administration between 2017-2021 and again under Biden.

"China is entering the region aggressively. It is learning fast and is ready to stay for the long-term," said Eric Farnsworth. He is now with the Council of the Americas and America Society.

"Unless the United States prioritizes regional economic policies in a more meaningful and effective way, the area will continue to tilt towards Chinese interests."

The U.S. Embassy in Lima has not responded to a comment request. Washington officials have warned repeatedly that Chinese investments in the region come with strings attached, and said that the United States was a more reliable investment partner.

'SINGAPORE of LATIN AMERICA - SINGAPORE'

Chancay, a new megaport located 80 km (50 miles), north of Lima, is a beacon for change. The state-owned Cosco Shipping of China is building it and promises shorter sea routes for both Peruvian as well as Brazilian goods to Asia.

The United States is concerned about the security of the port that will be opened by Xi while he's in Peru. But, more importantly, it will boost the trade route from the region to China.

Raul Perez-Reyes, Peruvian Minister for Transport and Communications and Communications, said at the port that "we will have direct routes into Asia, especially to ports in China. This will reduce the time by 10, 15, or 20 days, depending on the route."

He said that the port would compete with Mexico’s Port of Manzanillo, and then Long Beach in California.

Our goal is to make Latin America the Singapore of Latin America.

The port on the Pacific coast is driving other investments in order to improve connectivity. This is especially true for Brazilian soy producers who want to reduce shipping costs, travel times, and save money by avoiding the Panama Canal. Peru's government wants to push a $10 billion rail project.

This could lead to more Brazilian soy being transported via land from Brazil to Peru, and then onwards to China. Brazil's trade with the No. In recent years, Brazil's trade with the world's no.

However, most local officials and diplomatic representatives adopt a cautious approach. Both China and the United States, they say, are important partners. They admit, however, that China has paid more attention to Latin America.

A senior Peruvian official, speaking under condition of anonymity, said that Peru is "open to doing business with any country". The official explained that China concentrates its investments on Latin America and Africa, which are rich in resources.

He said that Peru hoped, during APEC, to sign an agreement with China, to upgrade the 2009 free trade agreement. This agreement mainly relates to intellectual property and electronic commerce, as well as customs procedures.

'SIGNALS of Enthusiasm'

Clemente Báena Soares said that the Chancay Port would be a big boost for Brazil's soybean farmers by cutting journey times almost in half to Asia.

He called on Peru to reduce red tape for Brazilian haulers, such as the load limits on highways connecting the two countries.

Jose Tam, President of the Peru-China Chamber of Commerce said that China is more proactive than other countries in South America when it comes to boosting its trade and investment relations.

Tam, the head of the association which includes copper mines like MMG Ltd’s Las Bambas or Aluminum Corp’s Chinalco, said that China is the most enthusiastic in the area.

Mario de las Casas said Peru's pivot to China was not political, and that it was open for investors from anywhere. The trend was business-related, with less U.S. investments available.

"Let the United States invest. It hasn't done so in many years," said he, adding that Peru is well-positioned to profit from any global trade tensions. "Here, there are no good guys or bad guys. There are only interests."

(source: Reuters)