On July 9, U.S. President Donald Trump issued a letter to Brazilian President Luiz Inacio “Lula” da Silva, in which he announced a 50 percent tariff on Brazilian imports to the U.S., set to take effect August 1. Two days later, Trump issued another warning to Mexican President Claudia Sheinbaum in which he announced a 30 percent tariff with the same start date. Despite facing similar tariff threats from the Trump administration, Brazil’s and Mexico’s responses diverged sharply – a split rooted in their respective relationships with the United States and China, as the two great powers move toward greater economic tension.
Brazil’s attempts to negotiate with the U.S., mainly via institutional channels driven by the embassy and foreign ministry, had limited success. The 50 percent tariff went into effect on August 6 after an initial operational delay. Numerous exemptions – including for aircraft, energy, and orange juice – will soften the economic impact, but ideological differences between Lula and Trump will likely further strain trade relations. The U.S. president cited the so-called “witch hunt” of his friend, former President Jair Bolsonaro, as justification for tariffs.
Mexico on the other hand, has held off most additional tariffs. Relationship building, via high-level dialogues between senior trade and security officials, and calls from Sheinbaum to Trump have been key to its success. Trump’s threat of a 30 percent tariff remains paused until October 30, and over 80 percent of Mexican exports to the U.S. remain tariff free, shielded by the provisions of the United States-Mexico-Canada Agreement (USMCA). Next steps for the upcoming USMCA review remain to be seen, but Sheinbaum has received praise for her government’s skilled approach to negotiation.
The outcomes of both recent tariff threats on Brazil and Mexico are not just indicative of each leader’s present relationship with Washington, but of broader geopolitical trends informed by a decades-long balancing act both countries have played with the U.S. and China. While trade relations are likely to remain unpredictable in the short term, in the longer term Mexico’s commercial ties to the U.S. and Brazil’s to China are likely to grow, with current events only reinforcing this trend.
Mexico has been among the United States’ top three trading partners for over three decades, and Mexican exports to the U.S. make up roughly 30 percent of the country’s total GDP. The 1994 NAFTA and 2020 USMCA agreements have deeply intertwined the two countries’ economies. In the automotive sector in particular, parts can be shipped back and forth across borders multiple times before reaching consumers; over 40 percent of U.S. auto parts imports came from Mexico, and over 31 percent of Mexican auto parts imports came from the U.S in 2024. Unravelling these trade ties – much like constructing them – would take decades, and while both countries are attempting to reshore and diversify supply chains, both Sheinbaum and Trump acknowledge the unique value of the relationship. Economic cooperation is crucial for both countries’ success.
China-Mexico trade, on the other hand, has been slower to grow – in part because of the extensive ties between Mexico and the U.S. Another limiting factor may be China’s lack of investments in Mexico. While some South American countries receive billions in Chinese investments, Mexico only received $710 million in 2024 – just 2 percent of total foreign direct investment (FDI). The largest contributor to FDI in Mexico is the U.S., at $16.5 billion (around 47 percent).
Finally, China and Mexico’s trade relationship is imbalanced, with Mexico’s trade deficit with China reaching $120 billion in 2024. On some fronts, it is even competitive. Mexican footwear and textile producers, for example, have long claimed China’s trade practices create unfair competition, leading the Sheinbaum government to impose tariffs of 15-35 percent on all textile imports produced in countries lacking a free trade agreement with Mexico (i.e. China). In late August, reports indicated that Mexico would increase tariffs on a group of countries including China in its 2026 budget proposal, a move that would both seek to protect domestic manufacturers and align with a Trump imperative if imposed.
Brazil’s trade landscape is considerably different from Mexico’s. Exports to the U.S. make up just 2 percent of Brazil’s GDP, whereas those to China represent 5 percent. Thus, Trump’s tariffs are less of a hit. In fact, they may even serve as a push to deepen relations with China. China has been Brazil’s top trade partner since 2009. China buys commodities Brazil has in significant quantities. In 2024, China imported $80 billion in Brazilian soy, iron, and petroleum alone. Total U.S. imports from Brazil in the same period were just $40 billion.
Brazil saw a surge in agricultural exports to China during the trade war under Trump’s first administration and is poised to reprise these benefits in 2025, logging 48.4 million tons of soybean sales to China in the first half of the year. Brazilian soybeans will also benefit from China’s recent decision to end tariff exclusions for U.S. agricultural goods. While Brazil and China will continue to face trade differences – including in Brazil’s management of the influx of Chinese imports the trade war diverts from the U.S. – the commodities trade will keep the relationship on stable footing.
In addition to the numbers, Brazil and China have a stronger diplomatic relationship than Brazil and the United States. Lula has been unequivocal in his support for China during the China-U.S. trade war. While many third countries remained wary of their relationship with China amid Trump’s threats of additional tariffs against any country that aids China in averting full impacts of U.S. tariffs, Lula personally attended the China-Community of Latin American and Caribbean States’ Forum in Beijing, held a bilateral meeting with Chinese President Xi Jinping, and stated he had “no concern” with possible U.S. response.
The two countries also are linked through forums for South-South cooperation, like BRICS, and have signed countless MOUs deepening collaboration across economic, technological, and cultural spheres. On the margins of Rio de Janeiro’s July BRICS summit, for example, Brazilian and Chinese officials signed an MOU to expand cooperation on artificial intelligence, aiming to open a joint research facility focused on agricultural development. Via the Sino-Brazilian High-Level Commission for Consultation and Cooperation (COSBAN) Brazilian and Chinese ministers and business leaders – sometimes as many as 100 – discuss opportunities to deepen the relationship roughly every two years.
The U.S. and Brazil have struggled to establish a framework of the same scale. The U.S. and Brazil Agreement on Trade and Economic Cooperation (ATEC) Commission has not convened since 2016, and a CEO forum last met in 2023. Trump’s strained relationship with Lula, and the ongoing Section 301 Investigations by the Office of the U.S. Trade Representative, are unlikely to encourage more meetings in the near future.
Ultimately, both Brazil and Mexico will continue to balance their trade and diplomatic priorities with the United States and China, particularly as uncertainty remains as to the outcome of a potential Trump-Xi leaders’ summit this fall. Even as Lula has expressed indignation at Trump’s demands, he has shown openness to negotiate. Sheinbaum, too, has expressed interest in trade relationships outside of the U.S., and is currently undertaking a $2.7 billion expansion of the Pacific Coast Port of Manzanillo – which primarily facilitates imports from China.
Like many other countries, Latin America’s two largest economies are not eager to pick sides between the world’s two largest powers – but if pressed, they will likely follow the trade flows and geographic proximity that best suit their competitive advantage. Mexico’s growing closeness to the U.S. and Brazil’s closeness to China is not just a Trump 2.0 phenomenon, but a decades-long trend that is likely to only deepen, potentially reinforcing the effects of China-U.S. competition throughout the global economy.