Guatemala Safe from Trade Wars

Autor: Michael McDonald, Business Reporter for Central America & Caribbean, Bloomberg

The United States-Guatemalan trade relationship is healthy even as President Donald Trump has ramped up trade wars with major partners like Mexico and China. 

Guatemala sends roughly 40% of its exports to the United States, mainly bananas, coffee and textiles, making it the top destination for Guatemalan goods. The U.S. imported $4.2 billion worth of Guatemalan products in 2018, up 5% from the previous year. Guatemala, in turn, imports a large share of its oil from the U.S. and has benefited from lower prices in recent years. 

The CAFTA-DR trade agreement has not drawn the ire of Trump like similar agreements such as NAFTA. This has kept trade barriers low and allowed goods to flow freely between the two nations without interruption. 

The U.S.-China trade war may actually represent an opportunity for Guatemala. China exports mainly manufactured goods to the U.S. and Guatemala could attract some of this manufacturing, especially in the textile industry where it already has the infrastructure and know-how, as relations between China and the U.S. remain tense. 

The top threat to Guatemala’s exports is currently a spate of low commodity prices. Coffee prices are near 13-year lows, driving many farmers into debt and out of business. Sugar prices have also declined in recent years and are hovering around their lowest since 2015. 

It would be unlikely for the U.S. to adapt a major trade policy shift toward Central America and commercial relations should remain positive in the months to come.