U.S. Reciprocal Trade Policy: Strategic Opportunities for Latin America Amid Global Uncertainty
By Jake E. Jennings | As featured on csis.org.
April 22, 2025
Terminal Portuaria de Guayaquil, Guayaquil, Ecuador Source: Unsplash
The adoption of a reciprocal trade policy by the United States represents one of the most significant shifts in the country’s economic approach in decades. As businesses and investors respond to this evolving landscape, both unprecedented opportunities and substantial risks emerge. The strategic recalibration of U.S. trade posture offers forward-thinking organizations a chance to address longstanding barriers while necessitating careful avoidance of potential disruptions in global supply chains and technology ecosystems.
Strategic Opportunities in the New Trade Landscape
The current administration’s emphasis on reciprocity in trade relations creates strategic openings for U.S. businesses that have struggled with asymmetric market access abroad. For decades, many U.S. companies have faced significant nontariff barriers when attempting to enter certain foreign markets, despite these countries enjoying relatively unfettered access to American consumers. For example, the 2025 United States Trade Representative National Trade Estimate Report identified non-tariff trade barriers abroad that foreign firms seeking entry face, including:
Argentina: customs documentation requirements (certificate of origin authenticated by an Argentine Embassy or consulate, or carrying a U.S. Chamber of Commerce seal, and digital services taxes.
Brazil: Import bans on remanufactured goods, sanitary and phytosanitary measures (e.g., U.S. corn imports), technical barriers to trade (e.g., Biofuels, wine, and telecommunications products), services barriers (e.g., express delivery, financial services, and telecommunications services), as well as digital trade barriers.
Canada: Digital trade barriers (e.g., data localization measures for certain industries, privacy restrictions) and conformity assessment procedures that differ from international norms.
Chile: Digital trade barriers.
Mexico: Customs barriers and trade facilitation, service barriers (e.g., electronic payments, insurance, and telecommunications), as well as discriminatory practices in the energy sector and digital services.
Rather than viewing these tariffs as merely protective measures, companies can utilize them as negotiating leverage to secure more equitable treatment in foreign markets.
The administration’s commitment to maintaining and strengthening the United States–Mexico–Canada (USMCA) framework by excluding USMCA-compliant goods from its “reciprocal tariffs” provides a relatively stable foundation for North American business operations amid broader global uncertainties. This regional economic architecture offers companies a reliable platform for nearshoring initiatives and supply chain diversification efforts. Although USMCA is up for review next year, key issues have arisen that are expected to take center stage between the parties. Most pressing among them are Mexico’s recent constitutional reforms on the judicial branch, the elimination of independent regulatory agencies, national security measures on technology, and Canada’s digital services tax. The review presents an opportunity for U.S. investors to address nontariff trade issues in Mexico and Canada.
With most of the region hit only by the baseline tariff (10 percent), large consumer markets like Brazil and the rise of business-friendly manufacturing hubs like Costa Rica make attractive choices for international investors seeking to hedge their exposure to the new global risk environment. As the U.S. remains the main source of foreign direct investment in Brazil, which is the largest economy in South America by dollar value and market size, U.S. investments are redefining northbound supply chain flows in advanced technologies, manufacturing, and rare earth extraction. Even small economies are ready to engage the renewed U.S. interest southward. Costa Rica was the first country to receive 2022 CHIPS Act funding for semiconductor assembly, testing, and packaging (ATP) capabilities, and has since become a back-end chip manufacturing and research and development hub due to its political stability and comparative advantage in the production of renewable energy for data centers. Likewise, other Latin American states are courting U.S. investments, such as Mexico and Panama, in tech manufacturing, complementing the U.S. advantage in advanced technology services. South America stands in a prime position to benefit from the burgeoning nearshoring and diversification strategies that international companies must adopt to remain competitive in a polarizing world system.
Finally, the recently established United States Investment Accelerator within the Department of Commerce provides a new opportunity to address investment barriers in the United States. This program is designed as a one-stop shop for incoming investments above $1 billion, creating a single office of coordination among U.S. agencies to reduce bureaucratic red tape for the implementation of these large, U.S.-based projects. For U.S. businesses seeking to capitalize on shifting supply chains and manufacturing realignment in the United States, this program may provide an opportunity to bolster the country’s competitive positioning in critical industries to support investment.
The Risk of Contradictions in Policy Execution
Despite these opportunities, fundamental contradictions in policy create significant strategic risks for American businesses. The selective application of trade principles—upholding certain agreements while undermining multilateral frameworks—introduces unpredictability into business planning horizons. Of the 20 countries with which the United States has free trade agreements (FTAs), 12 countries (60 percent) are in Latin America and the Caribbean, and 10 of them were hit by the universal 10 percent tariff. This policy undermines the long-standing trade architecture that countries have built their economies around.
Countries with an abundance of rare earth metals, advanced semiconductor materials, and other strategic resources may leverage their position to retaliate against perceived inequities. For example, Brazil is reported to have the third-largest global reserves in nickel, Peru in gold, lead, silver, zinc, and Bolivia and Chile with lithium resources. Their response to the tariffs may have ramifications for years to come as alternative sourcing often requires multiyear development timelines and substantial capital investment. The contradiction between seeking supply chain security while potentially antagonizing key suppliers represents a fundamental tension in the current policy framework.
This policy contradiction creates a complex risk matrix: While reciprocal tariffs aim to protect domestic industries, they simultaneously incentivize supplier nations to weaponize strategic resource dominance. Businesses must now balance inventory stockpiling against the capital intensity of alternative sourcing initiatives, particularly in sectors where material specifications limit substitution possibilities.
The implementation of “reciprocal” tariffs could also trigger cascading disruptions across global value chains, with particularly acute impacts on electronics, automotive, and consumer goods sectors. These disruptions manifest not merely as direct cost increases but also through secondary effects, including delivery delays, quality inconsistencies, and inventory management challenges. For Latin America specifically, “the most vulnerable sectors will be those with low profit margins (like agriculture) and the overall impact will be felt more by specific sectors—like Paraguayan meat or Ecuadorian cacao beans and flowers,” describes one scholar.
Perhaps most concerning from a long-term strategic perspective is the erosion of multilateral trust resulting from unilateral trade actions. The reciprocal tariff approach has undermined confidence in established trade governance frameworks, creating a trust deficit that will require years to rebuild. This deterioration of institutional reliability introduces systemic risk into global business operations, as companies can no longer rely on the rules-based order that previously provided predictability in international commerce. Therefore, it is imperative that companies engage with those countries to protect their businesses without landing themselves in the crosshairs of geopolitical disputes.
The Innovation Paradox: Reciprocal Tariffs and American Technological Leadership
The most complex dimension of the U.S. trade policy stance is its paradoxical impact on the United States’ technological leadership position. While designed in part to protect domestic innovation, these measures simultaneously threaten key enablers of U.S. technological advantage.
“Reciprocal” tariffs affecting semiconductor components and manufacturing equipment introduce significant vulnerabilities into the United States’ technology ecosystem. Despite substantial domestic investments through the CHIPS Act, the semiconductor industry remains globally interdependent, with complex supply chains spanning multiple jurisdictions, such as the Costa Rican ATP hub and Mexico’s capacity for advanced manufacturing. Disruptions to this ecosystem through trade friction risk undermining the very innovation capabilities these policies aim to protect.
The advancement of artificial intelligence capabilities represents perhaps the United States’ most significant competitive advantage, yet the current trade policy stance introduces frictions into critical talent acquisition pathways and research collaboration frameworks. Restrictions on technology transfers and heightened scrutiny of international research partnerships risk isolating U.S. artificial intelligence (AI) initiatives from global talent pools and complementary research streams in countries like Brazil, where U.S.-Brazil tech partnerships exist in areas like machine learning, climate modeling, and bioinformatics. This isolation threatens to slow innovation precisely when acceleration is most needed to maintain competitive advantage.
Beyond semiconductors and AI, reinstatement of the reciprocal tariff approach could introduce friction across the broader technology ecosystem, affecting everything from quantum computing initiatives to biotechnology development. The deeply interconnected nature of modern technology development means that barriers in one domain frequently cascade across multiple innovative pathways.
Going Forward: Strategic Considerations for Business Leaders
As businesses respond to the complex landscape, strategic clarity becomes increasingly valuable. The reciprocal trade policy framework offers genuine opportunities for addressing longstanding market access challenges while simultaneously introducing new forms of uncertainty. Successful organizations will develop nuanced approaches to supply chain diversification that leverage strategic openings in Latin American markets while mitigating exposure to emerging trade risks.
The coming year will see further evolution of this policy framework, with potential recalibration based on economic impacts and international responses. Business leaders should maintain flexible strategic postures, develop robust scenario planning capabilities, and invest in deeper understanding of the specific mechanics of reciprocal trade measures affecting their industry segments. Those who successfully respond to this environment will emerge with strengthened competitive positions in both domestic and international markets.
Jake E. Jennings is Basilinna Chair of the Americas, Trade, and Tech as well as an adjunct fellow (non-resident) of the Americas Program at the Center for Strategic and International Studies in Washington, D.C.