Peru’s Chancay Port Stokes Trade Tension Between US and China

A mega port built in the Peruvian town of Chancay looks set to intensify US trade war with China like never before. Some of President-elect Donald Trump’s aides are calling for slapping a tariff of more than 60% on every piece of merchandise coming through.

Peru and its neighbors look unfazed about the potential hurdles. Brazil, the economic giant of Latin America, is reportedly gearing up to construct a highway that will seamlessly connect its trade routes to the Chancay Port.

Colombia, Ecuador, and Argentina are also expected to leverage the port to funnel their goods to China, signaling a regional shift in trade strategies.

This $3.6 billion port project will revolutionize shipping by reducing transit times between South America and Shanghai, China’s bustling financial center, from a sluggish 35 days to just 23 days.

The drastic time savings will be achieved by bypassing traditional trade hubs like the Panama Canal, Mexican ports, and Los Angeles, establishing a direct link between Peru and China.

COSCO Shipping, a Chinese state-owned enterprise, spearheaded the project after receiving $1.6 billion in funding from the communist government. COSCO now holds a 60% stake, while the remaining ownership rests with a local Peruvian entity.

Though the port’s first phase is operational, three additional stages are still under development, promising further expansion in the years to come.

Peru’s Stand

Peru anticipates substantial economic benefits, estimating the creation of 8,000 jobs and an annual revenue surge of $4.5 billion.

The port offers China unprecedented control over its supply chain, enhancing the communist country’s control over shipping routes and access to Latin American commodities, according to Robert Khachatryan, CEO and founder of Freight Right Global Logistics, a Los Angeles, Calif-based freight forwarding agency.

“This port will redefine regional trade patterns,” he remarked during an interview with Nearshore Americas.

While the Peruvian government notes China’s proactive approach, it criticizes the U.S. for its apparent lack of trade engagements with the regional allies.

Currently, the U.S. enjoys a 15% trade surplus with Latin America, with imports constituting 31% of trade while exports reach 45%.

For Peru, however, trade figures tell a less favorable story. In 2023, U.S. imports from Peru rose by a modest 1.28% to $8.7 billion, a sharp decline of over 18% from the highs of 2021–22.

In stark contrast, China’s trade with Latin America has skyrocketed, soaring from $12 billion in 2000 to an astonishing $450 billion in 2023, Khachatryan added.

China’s exports to the region include mobile phones, computers, toys, television sets, and construction machinery, while it imports a wealth of raw materials such as Venezuelan oil, Chilean copper, and Brazilian soybeans.

Trade data reveals that Chinese imports from Peru alone surged by 16% in the past ten months, exceeding $24 billion.

Peru exports twice as much to China as it imports, showcasing the deepening economic ties between the two nations.

Why US is Worried?

China’s activities in the region will not only result in the extraction of valuable mineral resources but may also contribute to the consolidation of authoritarian regimes across the region.

Mauricio Claver-Carone, an adviser to Trump’s transition team, recently suggested imposing a hefty 60% tariff on imports from any country routing goods through Chancay Port.

China’s aggressive trade practices could even plunge many of its trade partners into crippling debt traps, says Daniel Pickard, International Trade & National Security Practice Group Leader at Buchanan Ingersoll and Rooney, a Pittsburgh, Pennsylvania-based law firm on trade and government regulations.

Pickard’s concerns seem well-founded. Consider Pakistan—a case in point. Former Prime Minister Imran Khan candidly admitted that his nation has become so entrenched in debt that it now borrows not for development, but merely to service existing loans. Pakistan’s financial woes escalated after embracing China’s ambitious Belt and Road Initiative.

“There’s a growing realization worldwide that Chinese investments often come at an unacceptably steep price,” Pickard emphasized.

He urged the White House to take proactive steps, advocating for closer economic and security ties with Latin American nations to counterbalance China’s expanding footprint.

The potential depletion of Latin America’s mineral resources could wreak havoc on the region’s economies, triggering mass migration toward the United States.

While China’s distance shields it from any immediate fallout, such as mass immigration, the U.S. could find itself dealing with economic and social upheavals right at its doorstep.