Paraguay Spies Opportunity in Trump’s Trade War

Is talk of a nearshoring boom just wishful thinking?

Source: Agencia IP

For two countries that like to talk up their “historic” and “valued” bond, Paraguay and the United States don’t do much business together. You don’t need to be fluent in economics jargon (the gravity model, comparative advantage) to guess why: they’re 5,000 miles distant and produce much of the same stuff.

In 2024, the South American republic sold barely $400m worth of goods to the US: a drop in the ocean compared to its exports to Brazil ($3.5bn) and Argentina ($3.4bn) in the same period. It’s a similar story in the other direction. Paraguay imported just under $1.2bn in goods from its North American ally between January and December. This figure is dwarfed by the $5.6bn worth of products it bought last year from China – a country with which it doesn’t even have formal diplomatic relations.

So as US president Donald Trump threatens pretty much every corner of the planet with sweeping tariffs – 47% on Madagascar, 30% on Nauru, 20% on the EU, 10% on most of Latin America, a staggering 125% on China, and 10% on the uninhabited (except for penguins) Heard and McDonald Islands – some in Paraguay are seeing not economic peril but a chance for profit.

Source: MEF

Of bulls and beef

“Our strategy should be to attract investment focusing on the benefits that Paraguay offers, such as its young labour force, tax advantages and readily available energy,” vice-minister for industry Mauricio Riquelme said last week.

The Peña administration, he continued, is seeking to take advantage of the tolls imposed on manufacturers in Asia – Vietnam, Cambodia and Laos are staring down additional costs just shy of 50% – and Paraguay’s substantial trade deficit and friendly relations with the US to entice firms to move their production here. It’s a trend Riquelme termed “regio-globalisation”, otherwise known as nearshoring or friendshoring.

Whatever the terminology, Paraguay’s government is choosing to overlook the flashing red lights on the global economy in favour of dollar signs. Paraguay, the vice-minister argued, could soon become “a hub of industrial development.”