Trade war risks instability and deforestation in Latin America

The latest round of tariff hikes in the ongoing U.S.-China trade war could have far-reaching impacts not only for major soy exporters Brazil and Argentina, but throughout the whole of Latin America. The region’s initial opportunism is giving way to fears over instability and slower global growth.  

On June 1, China suspended its purchases of U.S. soy in an escalation of the trade spat. The world’s largest buyer will look largely to Brazil to meet demand in a shift that could impact South American forests, as the risk of protracted tensions increases.

After a year of tit-for-tat tariffs, the impacts on Latin American countries are starting to sink in. A report from the United Nations Conference on Trade and Development (UNCTAD) estimated growth in exports for several countries in the region, including Mexico (5.8%), Brazil (3.8%), and Argentina (2.4%).

Yet, as some hope to capitalize, others are foreseeing doomsday. Few are willing to predict how long the trade spat will last, or how long its effects will linger.

“It generates insecurity, in general. That’s the thing,” said Lucilio Alves, from the Center of Advanced Studies in Applied Economics (Cepea) at the University of São Paulo. “This makes new investments harder.”

Deforestation risk

Last March, a group of scientists warned that the U.S.-China trade war could cause a devastating spike in deforestation in Brazil, as the country tried to absorb China’s soy demands.

“We forecast that a surge of tropical deforestation could occur as a result of the fresh demand being placed on China’s other major suppliers,” they wrote in an article in Nature, predicting Brazil could be pushed to expand production by up to 13 million hectares.

“We urge the U.S. and China to adjust their trade arrangements immediately to avoid this catastrophe.”

A little over a month later, Brazil’s National Confederation of Industries...