US-China trade war not expected to immediately impact Peru

The trade war launched by US President Donald Trump will only indirectly affect Peru, but uncertainties remain regarding the magnitude of the measures and whether they will impact the country’s projected growth for 2025.

Currently, the 10% tariff on Chinese imports does not affect the country’s copper demand. As a result, Peruvian exports – 34% of which go to China – will remain on track.

In January-November 2024, Peru exported copper worth US$15.5bn to China, according to the foreign trade and tourism ministry.

Meanwhile, Scotiabank maintained its 2025 GDP growth projection at 2.8%, but its expectations for potentially higher growth or economic bumps have diminished.

“Peru is particularly sensitive to metal prices, especially copper. Any event that affects global growth – or China’s – will affect prices,” the bank said in its weekly report. While current tariffs would not affect Peru that much, imposing higher ones of up to 60%, as Trump has promised during the campaign, remains a concern.

Peru eyes copper production of 2.7Mt this year. While there was initial optimism about exceeding this figure, lower ore grades at certain mines and a more cautious outlook make that unlikely.

Macro

The trade war also influences macroeconomic policies to mitigate risks. In that light, US protectionism could delay further base rate reductions and prolong inflation. 

According to Scotiabank, annual inflation was trending downward and reached 1.85% in January. The bank maintained its projection of 2.30% for this year due to the international context.

Also, Scotiabank initially projected two base rate reductions this year, but is now expecting only one, from 4.75% to 4.50%.

“A risk going forward is that this uncertainty could generate greater volatility in financial markets, affecting their profitability. It is not a predictable [US] government. Uncertainty encompasses global markets, trade relations, geopolitical tensions, the financing and functioning of global and bilateral multilateral organizations, the regulatory framework, and the dynamics of relations between countries,” the bank added.