Latin America News
LAST UPDATE: July 26, 2025
Trump says US may not have a negotiated trade deal with Canada
President Trump cast doubt on securing a trade deal with Canada before an August 1 deadline, suggesting the U.S. may impose unilateral tariffs of up to 35% instead, given slow progress in negotiations.
Insight
The impasse highlights rising geopolitical risk and uncertainty for Canadian exporters. As markets anticipate tariff escalation, Canada’s economic reliance on U.S. trade makes it particularly vulnerable to unilateral shifts in U.S. policy.
Canada Posts Wider Budget Deficit in First Two Months of 2025‑26 Fiscal Year
Canada’s fiscal deficit widened to approximately C$6.49 billion during the first two months (April–May) of the 2025‑26 fiscal year, driven by declining corporate and consumption tax revenues. Finance authorities are seeking departmental cuts.
Insight
The combination of sizable deficits and mounting trade uncertainty with the U.S. puts pressure on fiscal discipline in Canada. Rising deficit burdens could constrain public investment and highlight vulnerabilities amid a turbulent external economic outlook.
Retaliatory Tariffs Padding Canada’s Finances as Expenses Rise
Canada’s retaliatory tariffs on U.S. goods are generating revenue that helps offset declines in other tax streams, as domestic government spending increases. Analysts note that skyrocketing expenditures are still outpacing tariff receipts.
Insight
Canada is turning trade friction into short-term fiscal relief. But depending on retaliatory tariffs as revenue is unsustainable long‑term, especially as broader government expenditure continues to climb, pointing to wider structural fiscal challenges.
Brazil posts wider-than-expected current account gap in June, FDI disappoints
Brazil recorded a $5.131 billion current account deficit in June, exceeding the expected $4.363 billion. Foreign direct investment amounted to only $2.81 billion, below forecasts.
Insight
The unexpectedly wide deficit alongside subdued FDI inflows underscores Brazil’s growing external vulnerabilities. Weaker capital inflows reduce the cushion against volatile commodity cycles and may weaken its currency, particularly amid heightened trade tensions.
Brazil’s Annual Inflation Ticks Up Before Donald Trump’s 50% Tariff Deadline
Brazil’s annual inflation rose to 5.3% in early July, up from 5.27%, just as President Trump threatens to impose 50% tariffs on Brazilian exports starting August 1.
Insight
Rising inflation complicates the policy trade-off for Brazil’s central bank: with external risks mounting from threatened U.S. tariffs, tightening monetary policy may be necessary to anchor prices—but could constrain growth.
US Preparing New Legal Grounds for Trump’s Brazil Tariff Threat
The U.S. administration is reportedly creating new legal justifications to support Trump’s threatened 50% tariffs on Brazilian goods—despite Brazil running a trade deficit, unlike prior tariff targets.
Insight
Establishing a legal basis signals the U.S. may escalate protectionist measures using broader frameworks such as national security or unfair trade practices. This raises the prospect of repeat high-profile tariff threats to other trading partners.
Colombia central bank expected to cut rate after inflation dip
A Reuters poll showed 16 out of 20 analysts expect Colombia’s central bank to cut its benchmark rate by 25 bps to 9%, following a mild 0.10% rise in June inflation and a 12-month inflation rate of 4.82%, still above the 3% target.
Insight
With inflation slowing but remaining elevated and fiscal pressures mounting, monetary policymakers face tension between supporting growth and preserving credibility. A modest rate cut could be a cautious move to balance both.
