Trade Rivalry in the Americas: China Courts Latin America and the Caribbean

The tariff trade war between the U.S. and China has marked one of the most significant disruptions in global trade in recent history. Even though there is temporary mutual de-escalation in trade measures, this tentative stabilisation has not deterred China from actively diversifying its global economic partnerships, particularly with those states that have historically been under the U.S. sphere of influence, namely the Latin America and the Caribbean (LAC) region.

Bringing together leaders from Latin American and Caribbean nations, Chinese President Xi Jinping made an appearance for the first time in ten years to deliver the keynote address at the China-CELAC forum summit held in Beijing on May 12, 2025. This year marks the tenth anniversary of the forum that includes China and all 33 states in the Latin America and the Caribbean region. According to a press release by the Foreign Ministry of China, over fifty officials representing twenty-eight LAC countries and six regional organisations attended this year’s forum summit. Colombian President and the current CELAC President Gustavo Petro, Brazilian President Luiz Inácio Lula da Silva, Chilean President Gabriel Boric, and President of the New Development Bank Dilma Rousseff were some of the noteworthy attendees. The summit agenda focussed on enhancing trade, investment and infrastructure cooperation, and underscored China’s continued intentions to expand its diplomatic influence in America’s backyard. The summit is significant at a time when global trade is already reeling under a newly imposed tariff regime brought into effect by the U.S., and China’s offer of a trade alternative to states in the LAC region is a thoughtful diplomatic manoeuvre at this time. It aligns with the Belt and Road Initiative, a global infrastructure development strategy adopted by China, and aims at enhancing China’s geopolitical standing in the Western Hemisphere.

China’s Billion-Dollar Pivot to LAC

The Community of Latin American and Caribbean States (CELAC) first got together in 2010 and has since served as an important instrument of regional integration. Though the forum has been fraught with its share of uncertainty, internal divisions and lack of consensus since its inception, it represents an important regional political coordination mechanism for the LAC states. As part of its efforts to increase its global presence, China has been trying to actively engage Latin American states since the 1990s. These efforts were formalised in 2014 through the creation of the China-CELAC Forum (CCF) during a summit held in Brasília, Brazil. This engagement was initially driven by China’s economic interests of securing industrial raw materials and agricultural products for its rapid growth. In return, China had the promise of providing infrastructure investment and development financing to its CELAC trade partners. This was a significant achievement for China’s diplomacy in the region, which the U.S. considers its backyard.

Latin America and the Caribbean is a strategically relevant region due to its geographical proximity to the U.S. It is also an upcoming strategically significant region for China due to its potential for economic growth, abundance of energy and mineral reserves, and labour. While it is in the interest of the U.S. to maintain robust relationships with its neighbours, it is concerned by the fact that China has also been making inroads in forging stronger economic ties with the LAC nations in order to offer them an alternative to a U.S.-led economic framework. This diplomatic blitz by China in the Americas is in conflict with the U.S.’s political and economic interests in the region. This year, the summit of the China-CELAC Forum is being held in the shadow of the economic disruptions caused by the U.S.-China trade war and imposition of 10 percent tariffs by the U.S. on LAC countries. Hence, the opportunity is ripe for China to diversify trade relationships of the LAC states away from the U.S., and China seems to be taking that opportunity.

Xi has announced that China will provide CELAC countries with a credit fund of 66 billion yuan (around $9.2 billion) for their development projects. China has also pledged 3,500 government scholarships, 10,000 training opportunities, 500 international Chinese language teacher scholarships, and 300 training spots for poverty reduction technologies to CELAC states over the next three years.

U.S.-China Compete for Influence

The pre-eminence of the U.S. in the Western Hemisphere has been long established. The Monroe Doctrine set forth in 1823 by the U.S. President James Monroe was among the first foreign policy initiatives meant to thwart external intervention in the political affairs of the Americas. Initiatives that keep external influence from other states outside of the Western Hemisphere have been the guiding principle of the primacy of the U.S. in the Americas. This hegemony is now being challenged and put to test by the competition brought by China into the U.S.’s traditional sphere of influence. The latest statistics indicate how China is slowly taking the place of the U.S. as a major trading partner of the CELAC states.

China has replaced the U.S. as the top trading partner for several Latin American states, including Brazil, Chile, and Peru. Total trade volume between China and the LAC has expanded by 40 times, growing from approximately $12 billion in 2000 to over $489 billion by 2023. China is partnering with many CELAC countries like Argentina, Brazil, and Venezuela on infrastructure and economic development projects and is looking to expand its reach to other countries as well. Notable examples include the Belgrano Cargas Railway Renovation project in Argentina with a financing of $2.4 billion, the Coca Codo Sinclair Hydroelectric Plant project in Ecuador which was constructed at a cost of $2.8 billion, and the Panama-Colón Container Port project in Panama in which China has invested over $1 billion.By leveraging its economic tools with the CELAC states, China is pursuing its global ambitions and strategic objectives. The U.S. has adopted several measures in strategic response to growing competition from China in the LAC region.

Many CELAC countries like Argentina, Brazil, and Venezuela are already partnering with China on global infrastructure and economic development projects under the rubric of the Belt and Road Initiative (BRI). China pools several billion dollars annually for infrastructure projects like railways, ports, and power plants in Latin America and is looking to expand its reach to other countries as well. Countering the BRI is the Build Back Better World (B3W) initiative launched by the U.S. alongside the Group of 7 (G7) partners in 2021 pledging to dedicate $40 trillion in infrastructure investments by 2035 to cater to infrastructural needs of low and middle income countries. This initiative was followed up with the announcement of another collaborative enterprise between the U.S. and the G7 called the Partnership for Global Infrastructure and Investment (PGII), which aims to leverage $600 billion by 2027 for global infrastructure projects in the LAC region.

As China offers LAC the access to its markets, technologies, and capital, it seeks to secure a stable and long-term supply of resources and raw materials for itself from the region. These include materials significant for the industrial sector like lithium, copper, iron ore, oil and natural gas. Importing these materials also aligns with China’s sustainability goals and green transition. The U.S. is trying to offset such cooperation between China and the LAC by bringing in its ‘nearshoring strategy’, which is meant to divert manufacturing hubs from China and relocate them to the Americas. Not only are there strategic advantages for the U.S. in shifting commodity supply chains geographically closer to the U.S.,  but it will also instill impetus in industries like semiconductors and electronics which can thrive in the LAC.

In recent years, China has pooled hundreds of billions of dollars to the LAC region in the form of loans, development financing, and direct investments to fund large-scale infrastructure projects, telecommunications networks and renewable energy programmes, among others. Chinese state-owned financial institutions like China Development Bank and the Export-Import Bank of China have also been providing funds for projects in states like Venezuela, Ecuador, and Argentina. As an alternative to Chinese funding, the U.S. International Development Finance Corporation (DFC) is working to finance projects in the region. For example, the financing of  a $200 million industrial park development in El Salvador was announced by the DFC in 2023.

Further, China is trying to replace the older U.S.-led institutions in the region and challenge its established economic model. The Organization of American States (OAS), founded in 1948, has remained the main institution for regional cooperation and diplomacy in the Americas for the last several decades. However, many LAC states feel that it is heavily influenced by the U.S. and Canada, who dominate the organisation and undermine the autonomy of other smaller states. China seeks to bypass the OAS while giving a platform for states to interact without dictation of the U.S. Aiming to bridge this gap, the CELAC forum is a welcome alternative by states that have been critical of U.S. foreign policy in the past like Cuba and Venezuela.

In trying to reassert its leadership role, the U.S. has signed the United States-Mexico-Canada Agreement (USMCA) in 2020, which precludes a clause that discourages member countries from entering into free trade agreements with non-market economies like China. Americas Partnership for Economic Prosperity or the APEP launched in 2022 is another U.S.-led initiative towards the same goal of curbing China’s influence in North America. The U.S. is already a party to the landmark Central America-Dominican Republic Free Trade Agreement (CAFTA-DR), and six Free Trade Agreements (FTAs) with 12 states in the region as it has been a long-standing advocate for market-oriented approach, free trade, democratic governance, and institutional reforms. However, the recent protectionist measures and high tariff imposition by the U.S. has led states to reassess their economic relations with the U.S. and seek diversification in their trade partnerships.

The China model of economic development is, therefore, attractive to the CELAC states as it offers them immediate economic gains. Several U.S. assessments, however, have been expressing wariness about the dangers of proximity of CELAC states to China in terms of potential threats to their sovereignty and national security. Issuing large funds from Chinese agencies could land the LAC states in a ‘debt trap’ in case of their inability to pay back the loans, which would put them in the vulnerable position of being politically and diplomatically influenced by China. Further, collaborating with China on sensitive projects in telecommunications, cybersecurity and surveillance systems could have detrimental implications on national security of the states.

Conclusions

Over the past years, China has been growing aggressive in pursuing its global economic ambitions, especially in the developing world. This has been to the discomfort of the U.S. who has doubled down in reasserting its dominance in the liberal economic world order. These tensions seem to be coming to a head in the Latin American and Caribbean region as China is slowly making advances in the U.S.’s backyard creating both opportunities and risks for the LAC states but also creating a trade rivalry between the U.S. and China.

Dr. Shivani Yadav is a non-resident research fellow at the America Program of the Sixteenth Council