Overview
Earlier this week, President Trump kicked off his first term with a slew of immigration-related executive orders (EOs) and actions focused on limiting illegal immigration, aiming to deliver on a key campaign promise. The actions – which include measures like declaring an emergency at the southern border, ramped up deportations and potentially imposing tariffs on Canada and Mexico in response to a lack of satisfactory action on curbing immigration – create friction between President Trump and his new counterparts in Latin American countries. These measures have the potential to strain bilateral relations, as well as to rebound on American business. Regional leaders – with varied relationships to the US and its new president – have responded differently to the policy swing, even as all walk the line between perceived sovereignty issues and an economic relationship with Washington.
Mexico and Canada Balance Ties
The US’ direct neighbors to the north and south have been primary targets in President Trump’s plan to mitigate illegal immigration. President Trump announced plans to impose 25% tariffs on Canada and Mexico on February 1, part of a raft of measures aimed at stopping “mass numbers of people and fentanyl” from coming to the US over both borders. The tariffs, if imposed, could have significant impacts on both countries, both of which rely on trade with the US, and degrade the North American economic integration that has been a goal of the last several presidents. Economists from the Peterson Institute for International Economics estimates that the tariffs, applied at their most broad interpretation, could shrink the US economy by hundreds of billions of dollars. The imposition of tariffs may also nullify the USMCA free trade deal, violating language prohibiting tariffs against fellow members.
Canadian and Mexican leaders have attempted to walk a line between conciliatory and defiant, balancing the need to advocate for their national interests (or address what they see as a sovereignty issue) while addressing the US’ concerns in order to preserve a vital trading partner. Resultingly, Canada and Mexico have both taken concrete steps to address immigration concerns at their borders with the US: Mexico has expanded migration deterrence efforts and increased seizures of illicit opioids, while Canada has put new resources towards its border, including deploying two new Blackhawk helicopters and buying 60 U.S.-made drones to surveil the border.
At the same time, leaders in both countries have pushed back on the measures. President Sheinbaum of Mexico, herself a new leader without the reportedly close relationship with President Trump that her predecessor had, has been particularly outspoken, casting the tariffs as an issue of sovereignty and threatening retaliatory measures if an agreement to avoid tariffs is not reached. Canadian Prime Minister Trudeau’s response has been less effectual due to his recent promise to resign amid a downward political spiral. Nonetheless, dealing with the new US government will be a top consideration as the Labour party, and later the Canadian people, choose their new leader. Both top contestants are veering away from Trudeau’s history of environmental policies and higher social spending, and both candidates are making their credentials to negotiate with President Trump centerpieces of their election pitches.
Honduras and Others Push Back on Immigration Plans
The Honduras drew headlines last month when President Xiomara Castro warned that the country was prepared to expel the US military if the US went ahead with a policy of mass deportations. Castro, whose country hosts the largest US military task force in Central America from its Soto Cano air base, called the policy of deportations “hostile” to it and other Latin American countries. The impact would indeed be immense: according to data from ICE, some 261,000 Hondurans are currently awaiting removal from the US, the largest single population, and the country – already wracked by crime and economic ills – would struggle significantly to absorb the deportees.
Alongside Honduras, countries including Nicaragua, Venezuela, and Brazil have indicated that they will refuse to accept mass deportations to their countries. Nicaragua and Venezuela, both autocratic governments, resist all forms of cooperation with the US. Brazil has long significantly limited the numbers of deportees it will accept, while requiring extensive notice among other obstacles, and has indicated it will not readily accept increased numbers of deportees.
However, Honduras has softened its stance in recent days: Castro congratulated President Trump on his inauguration, and her foreign minister took to American media to clarify that the country has no plans to expel the American military (although the country is considering it so Washington “[takes] us more seriously”). Honduras plans to continue regular deportation flights, but the foreign minister called for close collaboration with the Trump White House to determine a mutual path forward on any significant ramping up. Mexico, which will be a major player in any deportation scheme, has similarly called for negotiation,
Panama Defends Control of Canal
Among the bilateral relations at their lowest point at the time of President Trump’s swearing in is the US’ relationship with Panama. President Trump has multiple times alleged on the campaign trail that the Canal – which the US helped to build and controlled from 1904 to 1977 – is being controlled by the Chinese, and stated his intention for the US to retake the critical waterway. Secretary of State Marco Rubio added Panama to a planned Latin American tour next week, emphasizing how serious the issue (or leverage over Panama) is to the administration. Panamanian President Mulino has roundly rejected these claims, asserting that the “Canal [does] and will continue to belong to Panama.” At the same time, however, his government has initiated an audit of the Panama Ports Company – whose ultimate parent company is a Hong Kong-based conglomerate. While analysts say there is no reason to believe China is influencing operations at the Canal, the early exchange of threats could spell a downward spiral for the bilateral relationship and for the Canal, which places a premium on a perception of neutrality that may already be damaged.
Return to “Maximum Pressure” for Regional Rivals
Unsurprisingly, President Trump’s return to office will bring with it a return to a more confrontational policy with regional rivals including Venezuela, Cuba and Nicaragua. The shift in policy on Cuba has already been swift: on January 14, outgoing President Biden issued an executive order removing an additional layer of restrictive trade measures that had been put in place in the second half of the Trump Administration, including lifting Cuba’s designation as a State Sponsor of Terrorism (SST). Just days later, President Trump and his Secretary of State Marco Rubio – himself the son of Cuban immigrants and an outspoken critic of the Díaz-Canel government – reinstated the SST designation and signaled that the door for thawing relations, just cracked, is decidedly closed. The re-designation drew a fiery response from Cuba’s government and will likely be followed by further sanctions, including fully ending the easing that Biden introduced in the last days of his tenure.
Despite initiating a “maximum pressure” campaign on Caracas during his last term, President Trump did not take any specific action against Venezuela in the first days of his term (although he included the country in a list of states from which the US will no longer allow a humanitarian parole entries, a program under which migrants from troubled countries could stay in the country for up to two years). In November, autocratic President Maduro offered a rare olive branch to President Trump, congratulating him on his election and calling the victory a “new start” for bilateral relations – interesting given their history. The opening is likely a bid to make some kind of deal to avoid even harsher sanctions, which crippled Venezuela’s economy while they were in place but ultimately did not succeed in diplomatically isolating Caracas, but instead fostered deeper relationships between the country and US rivals like Iran and Russia. The lack of immediate movement on Venezuela signals that a deal of some kind may be a possibility – but given Trump’s history on Venezuela, and Secretary of State Rubio’s hawkish position on Venezuela (yesterday, he called the democratically elected leader of Venezuela, currently in exile in Spain, and called for the restoration of democracy in the country) a return to maximum pressure is more likely than not.
Road Ahead for Bilateral Relations and US Businesses
The US’ new immigration- and Latin America-related policies are not set in stone, with several already facing legal disputes and other changes likely in the pipeline. The stage is set for President Trump’s signature foreign policy approach: deal-making. With leverage now largely on the US side, the Trump Administration is likely seeking negotiations with regional leaders on immigration policy, deportations, drug trafficking, tariffs and sanctions. While the President has taken a more confrontational approach to the region than his predecessors, many leaders in the Americas are reading the opening blitz as what it is: the opening offer in a negotiation. While this tactic is not without its risks - some worry that restricting trade with the US could push Latin American allies to deepen economic relationships with China, as well as damage the US’ own economy – there is likely more space for cooperation and deal-making than initial rhetoric may indicate, a possibility reflected by the moderate approaches of most US partners in the region.
US business, sectors of which have become increasingly reliant on Latin America in their supply chains and labor pool, are monitoring the situation closely. CEOs and other corporate leaders are reportedly launching “war rooms” to understand the potential impacts of the president’s flurry of executive actions. Concern is justified: broad sanctions on Mexico and Canada could significantly increase prices for companies that source materials or house part of their manufacturing base or supply chain in either country, and slashed immigration could significantly tighten a labor market that is still climbing down from record-setting pandemic-era tightness. Heightened tensions between the US and Latin American leaders could also make overseas operations more delicate, with several leaders threatening retaliatory tariffs or other trade restrictions. Economists warn that a reduced trade relationship with major partners in the Americas – or the end of the USMCA – could generally squeeze the American economy, making business at home more difficult. Business leaders will be watching closely, and should expect swift policy changes.
