“A huge amount will be saved on logistics budgets and it will generate income for Peru,” Chinese President Xi Jinping said in Lima on the day the port was inaugurated, according to a live blog posted by the El Comercio news website in Peru.

“Today we are witnesses to the birth of a new maritime corridor for the new era.”

The timing could hardly be better. This year, a Chinese free-trade deal with Ecuador came into effect and Beijing signed a deal with Venezuela on the protection of each other’s investments.

Colombia agreed in October to join the Belt and Road Initiative, a Chinese effort to smooth global trade routes by building new infrastructure, and China and Peru upgraded a 15-year-old free-trade agreement this month.

China’s exports to Peru – mainly mobile phones, computers, toys and LCD televisions, but with shipments of construction machinery also surging – grew by 12.3 per cent year on year to US$11.32 billion in the first 10 months of this year, according to customs data. Imports from Peru increased by 16.2 per cent to US$24.5 billion in the same period.

In terms of overall trade with South America, it mostly exports smartphones and equipment for public utilities and factories, and imports raw materials, including Venezuelan oil, Chilean copper and Brazilian soybeans.

China has worked with 22 Latin American countries on belt and road infrastructure projects, with shipments to and from Chile, Colombia and Ecuador also likely to pass through Chancay.

Naubahar Sharif, professor of public policy at the Hong Kong University of Science and Technology, said the new port “will improve the efficiency and scale of trade between Latin American and China, and potentially more broadly with Asia”.

“We are likely to see more exports of agricultural products such as meat and soybeans from Latin America to China, as well as more imports of products like electric goods, electric vehicles from China to Latin America,” he said.

The United States was China’s biggest export market by country last year, even though shipments fell 13.1 per cent in US dollar terms largely because of US onshoring and near-shoring of factory work.

China-US trade tensions began intensifying six years ago when Donald Trump imposed tariffs of 10 to 25 per cent on Chinese imports in his first term as US president.

Chinese exporters refocused on non-US markets to avoid the tariffs, and more of the same can be expected as Trump has vowed to place tariffs of 60 per cent on US imports from China in his second four-year term, which will begin in January.

South American countries will need more semiconductor chips, and machinery to build roads or do mining, said Gary Yim, a business strategist at Bollyman Express, a package delivery service in Hong Kong. He said China could now send those shipments by sea and eventually benefit in turn from a more prosperous South America.

“China has redundant equipment for roadworks,” Yim said. “The strategic value is the whole package, not just the shipment.”

Over the past century, the US has fostered deep political alliances and trade ties throughout Latin America. Washington has six free-trade agreements with 11 Latin American countries, including three in South America.

The US accounted for 31 per cent of Latin America’s imports last year and 45 per cent of its merchandise exports, according to the US Congressional Research Service.

US imports from Peru rose 1.28 per cent last year to US$8.7 billion, slowing from over 20 per cent year-on-year growth in 2021 and 2022.

Trump transition team adviser Mauricio Claver-Carone was quoted by American media outlets last week as saying that the US should slap 60 per cent tariffs on imports from any country that pass through the Chancay port.

But Trump is expected to make China’s life easier on the whole by turning away from any expansion of US free trade efforts around the world – reducing any competition with Beijing – and instead focusing on domestic interests, a core message of his campaigns since 2016.

Routine Chinese trade in South America will probably meet no US objection even if it grows, said Evan Ellis, a research professor of Latin American studies at the US Army War College’s Strategic Studies Institute.

But US officials would raise a red flag if China used trade as a form of coercion against a Latin American country or as a means towards espionage, Ellis said.

He said Washington would also frown on further use of Latin American countries for transshipment of Chinese exports to the US as a means of avoiding the higher tariffs on direct imports from China. Chinese factories targeting the US market have already proliferated in Mexico and Trump is threatening 25 per cent tariffs there.

“From a US perspective, there are different types of trade, some of which are more problematic than others,” Ellis said.

A Trump 2024 campaign pledge of tariffs of 10 to 20 per cent on nearly all imports would raise the allure of global trade excluding the US and raise China’s profile as a big player, Sharif said.

“Whether China would play a more central role, I think that is precisely what President Xi was alluding to in his speeches in Peru – the need to continue with multilateralism,” he said.

“And as he flies that flag most enthusiastically, it is safe to say China will be a more central player in such a new world.”

People perform during the inauguration ceremony of China’s state-owned Cosco Shipping Chancay port in Chancay, Peru. Photo: APEC Peru/Handout via Reuters alt=People perform during the inauguration ceremony of China’s state-owned Cosco Shipping Chancay port in Chancay, Peru. Photo: APEC Peru/Handout via Reuters>

Export-reliant China, the world’s second-largest economy, has aggressively accelerated trade relations in Africa, the Middle East and Southeast Asia as well as South America since the end of the first Trump administration in early 2021.

A lack of hostility in Washington would let Chinese traders and investors zero in on handling obstacles likely to crop up in South America, which has a combined population of 442 million.

Some parts of the continent are known for tough labour rules, protests over the environmental degradation caused by large projects and disputes over the control of resources.

Demonstrators in Lima complained in July that dynamite explosions to clear the Chancay port’s construction site had damaged nearby homes and posed risks to food and water, according to the Blueberries consulting firm.

In Ecuador, where China National Petroleum Corporation has operated oilfield services since 2003, foreign oil companies must hire local workers.

Chinese e-commerce investors will come under pressure to work in sync with South America’s laws and local ways of doing things, Zhang said. “We need to take an open, tolerant outlook to investing in other countries,” he said.

Additional reporting by Alice Li and Mia Nulimaimaiti

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP’s Facebook and Twitter pages. Copyright © 2024 South China Morning Post Publishers Ltd. All rights reserved.

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