The State of Tariffs One Year Later

The first anniversary of Liberation Day has passed. We can now assess the impact of the tariff regime on US trade with Latin America and on the broader relationship across the Western Hemisphere. Tariffs have been used not only to influence trade flows but also as political leverage to secure cooperation on issues that go beyond trade. From water to security, tariffs are shaping how the US now negotiates with Latin American countries.

Keeping track of US tariffs on Latin America is not easy. On April 2, 2025, the Trump administration imposed a 10-percent baseline tariff on most countries globally, including most Latin American countries, with few exceptions. Countries like Nicaragua (18-percent), Venezuela (15-percent), and Guyana (38-percent) received higher reciprocal tariffs. Mexico was a special case. USMCA-compliant goods were tariff-free and not affected by the Liberation Day tariff announcement. Separate orders issued in early 2025 imposed a 25-percent tariff on goods that did not comply with USMCA. 

Reciprocal tariffs and sector-specific duties changed in the months following Liberation Day. The US tariffs imposed on the auto, aluminum, and steel sectors were changed throughout the spring and summer of 2025. By August 2025, modified reciprocal tariffs took effect, with Bolivia, Costa Rica, Ecuador, and Venezuela at 15-percent, and Guyana and Nicaragua at 18-percent. Brazil had an effective rate of up to 50-percent, due to a combination of reciprocal duties and a separate tariff related to political tensions. 

In 2025, there were other developments in US trade policy toward Argentina and Mexico worth noting since they highlight the complexity of US trade policy in the current environment. President Trump has signaled interest in a close alignment with Argentina, providing a $20 billion USD currency stabilization arrangement in October 2025. The US and Argentina announced a reciprocal trade and investment agreement the following month. Under this agreement, the US would remove reciprocal tariffs on unavailable natural resources and non-patented articles for use in pharmaceutical applications, in exchange for Argentina’s elimination of non-tariff barriers to US goods in some specific sectors. In February 2026, the US and Argentina finalized the agreement, with the US providing zero reciprocal tariffs on certain agricultural products and capping other reciprocal tariffs at 10-percent, giving Argentina a protected status. This agreement did not remove the 50-percent tariffs on Argentine steel and aluminum, indicating the US's continued interest in protecting this sector despite close political alignment between the countries.

While Argentina’s preferential treatment with US tariffs represents a political reward, the use of US tariffs for the Mexican case illustrates political pressure. Mexico’s case is relevant given the USMCA review taking place this summer. Tariffs on non-USMCA-compliant goods, imposed in February 2025, were intended to secure cooperation from the Mexican government on reducing the flow of illicit drugs and irregular migration at the southern border. Interactions between Presidents Trump and Sheinbaum led to extensions and delays in the imposition of these tariffs. Later, in December 2025, Trump threatened to impose an additional five-percent tariff on Mexican goods if Mexico did not deliver water owed under the 1944 Water Treaty. This threat led to a new water-sharing agreement in February 2026. Mexico's experience illustrates how US tariffs have functioned less as traditional trade barriers and more as political instruments.

The Real Cost of Tariffs and the Case for Strengthening Trade Ties with Latin America

It is important to understand the direct and indirect costs associated with current US tariffs on Latin American countries, given the region's significant trade. US imports from Latin America accounted for 19-percent of total US imports in 2024. Mexico is the largest US trade partner, with imports from Mexico accounting for 15-percent of total US imports of goods in 2025. Because of the magnitude of the trade flows between the US and Latin America, US tariffs have produced measurable impacts on consumer prices in the US, supply chain disruptions, and overall uncertainty in the region. 

A recent study, which tracked the impact of 2025 US tariffs on retail prices by country of origin, estimated that tariffs contributed 0.76-percentage points to the all-items Consumer Price Index by October 2025. The new tariffs affected common grocery items often imported from Latin American countries, including coffee, beef, and fruit. 

In 2023, Latin American countries supplied about 80-percent of US unroasted coffee imports, with Brazil (35-percent) and Colombia (27-percent) as the major suppliers. In August 2025, with the 50-percent tariff, US imports of Brazilian coffee fell 46-percent compared to August of 2024. The US eliminated tariffs on Brazilian coffee by November 2025, but the impact of those tariffs led to higher coffee prices in the US. 

Supply chain disruptions caused by US tariffs affected consumer goods produced in Mexico. Mexican steel exports declined by 12-percent between January and October of 2025, and transportation equipment exports decreased by 7-percent from the previous year. Current US trade policy has created significant uncertainty about future manufacturing production plans in Mexico. 

Given the evidence on the costs of tariffs beyond trade flows, the US should use trade policy to strengthen ties with Latin American countries and to promote cooperation to improve supply chain integration across the Western Hemisphere. Using tariffs as a political tool can produce unintended consequences, including costs that are difficult to quantify and may outweigh the benefits of any specific tariff imposition. Using US trade policy as a carrot rather than a stick could improve US presence and cooperation across the hemisphere. Negotiating trade agreements that promote the flow of goods is particularly important given China’s growing presence and influence in Latin America. The USMCA review this summer provides the US with an opportunity to build a positive trade framework that strengthens regional collaboration. If the USMCA review is successful, it could serve as a model for advancing broader hemispheric trade integration.   

The author thanks Isabella Elias, MPP candidate at Pepperdine School of Public Policy, for research assistance.