China-LAC Trade: Four Scenarios in 2035

Trade between China and Latin America and the Caribbean (LAC) experienced dramatic growth since the early 2000s. Going forward, China is poised to solidify its position as a leading regional trading partner. 

By 2035, trade values will likely reach unprecedented levels. This, accompanied by greater Chinese investment and financial flows, will further increase China’s economic importance for LAC countries, with potential implications for prosperity and geopolitics in the region and beyond. In addition, the composition of LAC exports to China is likely to differ from today’s. Regional governments and businesses must think and plan ahead. 

To provide greater insight into future commercial scenarios, “China-LAC Trade 2035” aims to trigger policy discussions and influence actions based on how this growing relationship may evolve. Drawing on economic modeling developed by the Pardee Center for International Futures at the University of Denver, as well as varied assumptions regarding economic growth and trade relations, this report outlines four scenarios for China-LAC trade through 2035.¹

• Scenario 1, Current Path: Despite China’s rise, the United States will remain LAC’s top trading partner through 2035. This will occur even though, from 2021 to 2035, LAC-China trade is expected to increase 1.8 times the expansion rate of global trade, reaching more than $700 billion (more than doubling 2020 figures). 
• Scenario 2, Partners in Flux: By 2035, China will have overtaken the United States as LAC’s main trade partner in goods. The development will result in a historically low degree of LAC trade dependence on the United States. In 2020, LAC was about three times more dependent on the United States for exports than on China. By 2035, the United States trails behind China by 1.2 percent. China will represent more than 40 percent of exports from Brazil, Chile, and Peru. 
• Scenario 3, Demise of the Agricultural Bonanza: The sectoral composition of LAC exports to China changes over the next fifteen years; in particular, a steady decline is seen in the share of agricultural shipments. This scenario has major implications for governments and companies, because agricultural products accounted for around one-third of LAC exports to China in 2020. In parallel, LAC-China materials trade—such as metal and mineral commodities—will continue to rise, but at a slower pace. In 2035, China could represent 45 percent of total LAC materials exports, compared to 3 percent in 2000. 
• Scenario 4, Balancing Act: An unprecedented level of mutual trade dependence emerges between China and LAC, largely driven by growing LAC imports from China. By 2035, a larger number of LAC countries would have China—instead of the United States—as their top import partner. Further, this scenario also points to historically high trade deficits for LAC in its relations with China, a thorny issue that might spark policy debates. 

This report acknowledges the sharp differences across LAC countries. While the objective is to consider the region as a whole, it highlights Brazil and Mexico as case studies of regional heterogeneity. Brazil may enter a challenging moment in its trade relations with China as agricultural exports lose relative importance. This, along with a rise in Chinese imports, is expected to cause Brazil’s current trade surplus to shrink. For Mexico, the report reveals that the United States is expected to preserve—and even increase—its share of the country’s imports, bucking broader regional trends. In addition, by 2035, Mexico is likely to also make progress in the diversification of its export destinations through China and other markets. 

Ultimately, when analyzing the likely contours of LAC trade in 2035, what emerges is that China and the United States will probably account for similar shares of the region’s overall trade, but with important distinctions across LAC countries. It also becomes clear that the sectoral composition of LAC exports to China is likely to change considerably over the next fifteen years, with significant implications for several countries. Across the different scenarios, China’s participation in LAC overall trade range from 15 to 24 percent, up from less than 2 percent in 2000. 

In light of these potential developments, this report offers stakeholders in LAC, China, the United States, and elsewhere elements to explore different future scenarios and proactively contemplate the “what ifs” of China-LAC trade relations. By planning ahead, they will be in a better position to navigate these uncertainties now and in the future.

To read the full report by the Atlantic Council, please click here.