Investing.com -- Newly imposed US tariffs on Mexico, Canada, and China could create export opportunities for several Latin American countries, according to Bank of America.
While some of these tariffs may be temporary, the bank says that Brazil and Central America & Caribbean (CAC) nations stand to gain in the short term, while Panama, Chile, and Costa Rica could benefit from longer-term supply chain relocations.
"Tariffs on Canada, Mexico and China mean that these countries are likely to lose market share in US imports, which opens an opportunity for LatAm countries to export to the US," said BofA.
The US imposed 25% tariffs on Canada and Mexico (10% on Canadian energy) and an additional 10% tariff on Chinese goods. While Canada and Mexico have received a temporary delay, "the 10% tariff on China took effect on February 3," BofA noted.
"We find that Brazil could benefit the most in the short term as it could redirect exports of oil and agricultural products to the US," the report stated. Additionally, "Central America and Caribbean countries also have potential to increase their market share in the US market for food, light manufacturing, and semiconductor chips."
For long-term supply chain shifts, BofA identified Panama, Chile, and Costa Rica as key beneficiaries.
"We evaluate LatAm countries along these lines and find that Panama, Chile, Costa Rica, Paraguay, Uruguay, and El Salvador are well-positioned to benefit from potential supply chain relocations," analysts wrote.
While BofA’s base case assumes "the 25% tariffs may be short-lived," uncertainty remains. "We cannot rule out a scenario in which 25% tariffs linger for longer," the firm warned.