In South America, Trump already losing a trade battle with China

The Chancay port near Peru’s capital Lima which is being built by China’s state-owned Cosco Shipping.
| Photo Credit: Reuters

In South American copper giant Peru, the incoming Donald Trump administration in the U.S. will find itself already on the losing side in a trade battle with China, part of a bigger power realignment around the resource-rich region in Washington’s backyard.

Peru, the world’s second largest copper exporter, is set to host Asia-Pacific Economic Cooperation leaders this week, with China’s President Xi Jinping expected to attend and inaugurate a major new Chinese-built port in the country. Outgoing U.S. President Joe Biden is also on the guest list.

Peru reflects a wider challenge for the White House around South America, where China’s presence has grown rapidly given its huge appetite for the region’s main exports: corn, copper, soy, beef, and battery-metal lithium.

That has made Beijing the go-to trade partner from Brazil to Chile and Argentina, eroding Washington’s regional political clout, a trend that widened under Mr. Trump’s ‘America First’ inward turn during his first administration and again under Mr. Biden.

“The strategic value is that this is the U.S.’s backyard,” said Li Xing, professor at the Guangdong Institute for International Strategies, adding it helped counter U.S. presence around the Indo-Pacific and offset trade war risks.

“China cannot start by building military bases there because it is too sensitive and will make China’s conflict with the United States too pronounced… So it has made inroads with economic ties first.”

Dramatic shift

Peru demonstrates the dramatic shift. China’s trade lead there over the United States widened to $16.3 billion last year, UN Comtrade data show, a stark reversal of just a decade ago when Washington was the dominant player.

That has come hand-in-hand with investment from energy to mining.

China overtook the United States in 2015 on trade with Peru, widening the gap under Mr. Trump’s previous administration from 2017-2021, and again under Mr. Biden.

“China has entered the region aggressively, is learning quickly, and is prepared to remain for the long term,” said Eric Farnsworth, a former State Department official now at the Council of the Americas and Americas Society.

“Unless the United States meaningfully prioritises regional economic policy in a new and more effective way, the region will continue to tilt toward Chinese interests.”

The U.S. embassy in Lima did not respond to a request for comment.

Washington officials have repeatedly warned publicly that Chinese investment in the region comes with strings attached and said the United States is a more reliable partner.

A beacon of the change is a new megaport 80 kilometres north of Lima in Chancay.

It is being built by China’s state-owned Cosco Shipping and promises to shorten sea routes to Asia both for Peruvian and Brazilian goods.

The Chinese-controlled port, set to be inaugurated by Mr. Xi when he is in Peru, has sparked concern from the United States over regional security, but more importantly will turbocharge the region’s trade highway to China.

“We will have direct routes to Asia, particularly to ports in China, which will be cut by 10, 15, 20 days depending on the route,” Peruvian Minister of Transport and Communications, Raul Perez Reyes said.

He added that it would compete with Mexico’s Port of Manzanillo and eventually Long Beach in California. “Our aim is to become the Singapore of Latin America.”