Since China and Latin America established a comprehensive cooperative partnership in 2014, under the guidance of overall China–Latin America cooperation and the high-quality co-construction of the Belt and Road Initiative, China–Latin America economic and trade cooperation has become an important pillar supporting economic growth in Latin America. In the face of the impact of the U.S. economic downturn and the Trump tariff storm, the Latin American economy faces the risk of prolonged sluggishness. One of Trump’s principal intentions is to contain or even eliminate China–Latin America economic and trade cooperation. China is capable of sustaining continued economic growth, providing strong support for China–Latin America economic and trade cooperation and for economic growth in Latin America. Both China and Latin America not only need to jointly respond to new challenges, but also need to seize new opportunities and open up new prospects for China–Latin America economic and trade cooperation.

(1) Trump’s Intention to “Enclose” the Latin American Region

In 2016, the author proposed an analytical framework of the U.S. “two-ring strategy.”¹ This framework can be used not only to analyze the basic significance of the “new Monroe Doctrine,” but also to analyze U.S. policy toward Latin America during the “Trump 2.0” period.

In light of U.S. policy practices and behavior since “Trump 1.0” (January 2017–January 2021), the “two rings” can be extended to refer to the United States’ “homeland security ring” and “dollar hegemony ring.” The homeland security ring is mainly composed of the “two-ocean defense system” (the Atlantic Ocean and the Pacific Ocean) and the “security management and control area” (Mexico, Central America, and the Caribbean region). The dollar hegemony ring seeks to encompass the globe, especially key regions such as Asia-Pacific, the Americas, and Europe. The Americas constitute the “vertical axis” of the “two rings.” In North America, Canada and Greenland belong to the upper half of the vertical axis of the “two rings.” In Latin America, with the Panama Canal as the dividing line, the United States not only regards the areas north of the canal as a “security management and control area,” but also views them as “territory held in its embrace.” South America south of the canal possesses vast territory, diverse species, and abundant resources. The United States views it as its own “thousand-year reserve” [千年储备, meaning a reserve to last a long time], used to safeguard U.S. sustainable development.

From this perspective, the so-called “two rings,” like two fences guarding the United States’ yard, have become an important objective of “Make America Great Again” (MAGA). Trump has attempted to annex Canada and Greenland, intends to “enclose” the Latin American region, and has adopted a series of measures targeting “security management and control areas” such as Panama and the South American region.

First, he seeks to forcibly “reclaim” the Panama Canal.

The Panama Canal is a key node in the United States’ “two rings” and its vision for the Americas. The canal connects the Atlantic and Pacific Oceans and links South America and North America. Its economic, trade, security and defense, and geopolitical significance is extremely prominent. Accordingly, Trump has disregarded Panama’s national sovereignty and territorial integrity, defining the Panama Canal as a U.S. “key strategic asset” and pressuring the Panamanian government to “return” the canal to the United States.

Second, Trump seeks comprehensive control over the “security management and control area.”

In the view of the United States, Mexico, Central America, and the Caribbean are the principal sources of U.S. nontraditional security threats, such as drugs, illegal immigration, and organized crime. Using the fight against drugs and illegal immigration as a pretext, Trump has designated drug trafficking organizations as terrorist organizations, issued military threats, and wielded the tariff cudgel to coerce countries in the region into complying with U.S. directives. In doing so, he has sought to extend the United States’ homeland security boundary from the U.S.–Mexico border to Panama and the Caribbean Sea, turning these areas into the United States’ “second border” and “third border.”

Third, Trump is attempting to undermine or even block economic and trade cooperation between South America and China.

For example, the Trump administration has continued to employ narratives such as “debt traps” and “resource plundering” to distort and smear cooperation between China and South American countries; demanded that Argentina halt the China–Argentina currency swap agreement; used the threat of imposing additional tariffs to threaten and deter China’s oil cooperation with Venezuela; and taken advantage of a period in which Peru was improving its laws and regulations to disrupt the commercial operation process of Chancay Port.

(2) Latin American Economies Face the Risk of Prolonged Sluggishness

According to statistical data from the Economic Commission for Latin America and the Caribbean (ECLAC), the average annual gross domestic product growth rate of the Latin American region from 2014 to 2024 was only 1 percent. ECLAC had previously hoped that the Latin American region could achieve economic growth of more than 2 percent in 2025. However, this expectation is difficult to realize. During the “Trump 2.0” period, Latin American economies will face the risk of low growth below 2 percent.

Based on the structure of the goods and services trade, Latin American and Caribbean countries can be divided into three groups. The first group consists of industrial manufactured-goods exporting countries, mainly Mexico. Mexico is the largest exporter of industrial manufactured goods in the Latin American region. Industrial manufactured goods account for approximately 90 percent of its goods exports. In particular, exports of capital- and technology-intensive products such as automobiles, electronics, and household appliances are substantial, and exports of labor-intensive products such as textiles, apparel, and leather goods are also significant. The United States is Mexico’s largest trading partner, and more than 80 percent of Mexico’s goods exports depend on the U.S. market. Mexico is the second-largest source of the United States’ trade deficit. “Eliminating trade deficits” and “revitalizing U.S. manufacturing” are two major objectives during the “Trump 2.0” period, which will deal a heavy blow to Mexico’s manufacturing sector. Accordingly, Mexico will be directly affected by the slowdown in U.S. economic growth and the Trump tariff storm.

The second group consists of service-oriented economies, such as Panama in Central America and small island countries in the Caribbean. In these countries, services trade accounts for more than 50 percent of total exports. In Saint Kitts and Nevis, Antigua and Barbuda, and Grenada, this figure even exceeds 90 percent. The Trump tariff storm has a limited direct impact on these countries, but its indirect impact is substantial. In particular, increased uncertainty in the U.S. economy, the global economy, and global trade will have a significant negative effect on these countries’ services trade. The Panama Canal is the economic lifeline of Panama. Services trade related to the canal, such as shipping and tourism, constitutes a pillar of Panama’s national economy. Revenue from services trade accounts for approximately 20 percent of Panama’s GDP, while canal-related fiscal revenue accounts for about 25 percent of the Panamanian central government’s total fiscal revenue. The United States is the largest user of the Panama Canal, with U.S. cargo accounting for approximately 75 percent of the canal’s total freight volume. China is the second-largest user, accounting for about 20 percent of total canal freight volume. Trump’s threat to “reclaim” the canal, along with attacks on China’s shipbuilding and shipping industries, will seriously disrupt the normal operation of the Panama Canal. In addition, the contraction of global trade triggered by the Trump tariff storm will severely affect the cargo throughput and operating revenue of the canal, thereby dragging down Panama’s economic growth. Tourism is the principal source of foreign exchange earnings for small Caribbean island countries. The United States, Canada, and the European Union are the main sources of inbound tourists. Slowing economic growth or outright recession will lead to declines in both tourist arrivals and tourism revenue in these countries.

The third group consists of primary commodity–dependent economies, mainly South American countries. Primary commodities account for more than 60 percent of the goods exports of South American countries. In countries such as Venezuela, Bolivia, and Peru, this share even exceeds 90 percent. Venezuela is a petroleum-based economy and has long been subject to U.S. economic sanctions. With the exception of Venezuela, the Trump tariff storm has had a relatively limited direct impact on other primary commodity–dependent economies. However, its indirect impact is substantial, especially as rising uncertainty in the world economy and global trade exerts negative pressure on commodity prices. For example, from January to April 2025, the monthly average spot price of the Organization of the Petroleum Exporting Countries (OPEC) reference basket of crude oil fell from U.S. $79.4 per barrel to U.S. $69.4 per barrel.² Since the beginning of 2025, prices of commodities such as soybeans, copper concentrate, and iron ore have also shown downward trends. In recent years, economic growth rates in South American countries have generally been low, and declines in commodity prices will exacerbate an already difficult situation.

(3) China–Latin America Economic and Trade Cooperation Sees New Opportunities

The year 2024 marks the tenth anniversary of the establishment of a comprehensive cooperative partnership between China and Latin America. The China–Latin America economic and trade cooperation goals proposed by Xi Jinping in 2014 have been successfully achieved.³ By 2023, China’s stock of direct investment in Latin America had reached approximately U.S. $600.8 billion, and in 2024, China–Latin America goods trade totaled approximately U.S. $518.5 billion.⁴ China’s economic growth constitutes a solid foundation for achieving the two major goals of China–Latin America economic and trade cooperation. From 2015 to 2024, China–Latin America goods trade expanded from approximately RMB 1.5 trillion to nearly RMB 3.7 trillion. During this period, China’s goods imports from Latin America increased from about RMB 600 billion to RMB 1.7 trillion, with an average annual growth rate of 10.2 percent. Over the same period, China’s average annual gross domestic product growth rate was 5.8 percent. For every 1 percent increase in China’s gross domestic product, China’s goods imports from Latin America increased by 1.4 percent. From 2014 to 2023, China’s annual average flow of direct investment to Latin America amounted to approximately U.S. $15.8 billion.⁵ Although China’s stock of direct investment in Latin America is concentrated in the British Virgin Islands and the Cayman Islands (accounting for approximately 97 percent), China’s non-financial direct investment has already spread across Latin America and the Caribbean, with investment sectors and investment models becoming increasingly diversified. Over the next decade—by 2035—China’s goods imports from Latin America are expected to exceed RMB 3 trillion. There exists a significant linear relationship between China’s goods imports from Latin America and China’s GDP.⁶ Taking 2024 as the base year, and projecting China’s average annual GDP growth rate from 2025 to 2035 at 3 percent, 4 percent, and 5 percent, respectively, China’s goods imports from Latin America in 2035 would reach RMB 2.7 trillion, RMB 3 trillion, and RMB 3.5 trillion. From 2025 to 2035, China has the conditions and the capacity to achieve an average annual GDP growth rate of around 4 percent, and China’s goods imports from Latin America in 2035 are expected to exceed RMB 3 trillion. In the future, China can further promote China–Latin America economic and trade cooperation in the following areas.

First, China can use goods trade as the engine to strengthen cooperation between itself and Latin America across supply chains, production chains, and value chains. In terms of resource endowments, South America is richly endowed with natural resources. China and South American countries can deepen and expand supply chain cooperation based on these resource endowments. In terms of division of labor, Mexico and Central American countries possess relatively significant labor resource advantages. El Salvador, Honduras, and Nicaragua are becoming exporters of labor-intensive products, while Costa Rica is an exporter of technology-intensive products. China and these countries can carry out production chain cooperation based on division of labor. Developed economies such as the United States, Japan, and European countries still occupy a dominant position in global value chains. China and Latin America can enhance both sides’ position and share in global value chains through local-currency swaps and financial cooperation.

Second, in response to dollar hegemony and debt traps, China can strengthen China–Latin America cooperation on “de-dollarization.” The debt crisis of the 1980s demonstrated to the world the harms of dollar hegemony and U.S.-style debt traps. From the late 1970s to the early 1980s, in order to escape stagflation, the Federal Reserve sharply raised benchmark interest rates. As a result, the external debt burdens of Latin American countries such as Mexico increased dramatically. Both the volume and prices of primary commodity exports from Latin American countries declined simultaneously, export revenues from primary commodities fell sharply, and a debt crisis swept across the Latin American region. In the name of “rescuing” countries from the crisis, the United States put forward a series of debt restructuring plans based on the principles of “ideology,” “eliminating deficits,” and “locking in the dollar,” forcing Latin American countries to carry out democratization reforms, cut or eliminate fiscal deficits, and accept the U.S. dollar as the sole currency for external debt. These three principles constitute the concrete manifestation of the debt trap and are also the principal criteria for identifying a debt trap. Eliminating the constraints and harms of these three principles is one of the main objectives of China–Latin America financial and monetary cooperation. Expanding cooperation between China and Latin America under the Cross-Border Interbank Payment System (CIPS) will help reduce the risks from Latin American countries’ dependence on the U.S. dollar and on the international settlement system of the Society for Worldwide Interbank Financial Telecommunication (SWIFT).

Third, China can break through U.S. sanctions and blockades and strengthen energy cooperation with Venezuela and the Caribbean. Venezuela is an important energy supplier to the Caribbean region. From 2005 to 2014, Venezuela cumulatively supplied 300 million barrels of crude oil to the region and relevant countries. The value of this crude oil trade converted into long-term, low-interest loans reached a cumulative U.S. $12 billion,⁷ which effectively ensured energy supply in the Caribbean region and supported the region’s integration process as well as its economic and social development. Since the United States imposed economic sanctions on Venezuela, Venezuela’s crude oil production and export volumes have declined sharply, and it has almost lost its capacity to supply energy to the Caribbean region. Meanwhile, energy shortages are one of the major factors constraining economic and social development in the Caribbean. China and Venezuela are all-weather strategic partners, and oil is a key area of China–Venezuela cooperation. Strengthening China–Venezuela oil cooperation will not only help Venezuela achieve a rapid economic recovery, but will also help comprehensively restore and enhance Venezuela’s capacity for energy cooperation with the Caribbean region, especially its energy and economic and trade cooperation with Cuba.

Fourth, to prevent the risks of U.S. military threats or intervention, China can strengthen China–Latin America economic and trade security cooperation. In view of the fact that Trump has already issued threats of military intervention in the Panama Canal, security pressures on China–Latin America maritime trade routes have risen sharply, making China–Latin America economic and trade security cooperation increasingly important and urgent. China should strengthen military exchanges and mutual visits, either through overall cooperation or bilateral cooperation with Latin American countries. As China’s military modernization continues to achieve more and more significant results, the People’s Liberation Army Navy may visit Latin America at appropriate times and carry out escort and rescue exercises. In addition, in April 2025, China formally acceded to the Agreement on Port State Measures to Prevent, Deter and Eliminate Illegal, Unreported and Unregulated Fishing. At appropriate times, China and relevant Latin American countries may carry out joint fisheries law-enforcement cooperation, with combating illegal fishing as the primary objective.