Amid an increasingly changing US trade policy environment, Central America—and particularly El Salvador—faces challenges and opportunities arising from recent adjustments to tariffs imposed by the United States on countries around the world, with particularly pronounced impacts in Asia.
I- Protectionism and the reconfiguration of global trade
US trade policy has entered a phase of greater protectionism, raising tariffs on products from countries such as China, India, Pakistan, and Bangladesh. These measures, which in some cases have reached 49% in sectors such as textiles, are prompting US importers to seek new suppliers with better tariff conditions.
II- El Salvador: Potential beneficiary
Thanks to its geographical proximity to the US market, El Salvador has emerged as an attractive candidate to replace Asian imports. Although tariffs on certain Salvadoran goods have increased by up to 10%, the same products from Asia face tariffs of up to 49%. Sectors such as textiles and clothing, plastics, and food products are already showing signs of growth in El Salvador.
In addition, the dollarization of the Salvadoran economy, improved internal security, and reforms aimed at facilitating the business climate are strengthening El Salvador’s competitiveness vis-à-vis other emerging markets and competitors in the region.
III- Macroeconomic risks and sustainability
However, this window of opportunity is not without risks. El Salvador is implementing a US$1.4 billion IMF-backed fiscal adjustment program aimed at restoring fiscal sustainability, strengthening governance, and mitigating the risks associated with the use of Bitcoin as legal tender.
Meeting ambitious fiscal targets, reducing public spending, and deeply restructuring the pension system could limit the state’s ability to fully support productive sectors that require investment to scale up their export capacity.
Furthermore, the strategy’s success depends on how quickly Salvadoran companies can adapt and increase production to capture demand diverted from Asia.
IV- What about the rest of Central America?
While El Salvador is positioning itself as a possible “unexpected winner” in this new trade landscape, other Central American countries could face greater difficulties in adapting. Less diversified economies, exchange rate fluctuations, and specific impositions such as the 18% tariff imposed on Nicaragua, compared to the 10% tariff imposed on the rest of Central American countries, may pose additional challenges for the rest of the jurisdictions.
Furthermore, if the US continues to use tariffs as a political tool, the region could experience greater trade uncertainty, affecting investments and long-term strategic decisions.
Recent US tariff adjustments are rapidly reshaping the global trade landscape. For Central America, and especially for El Salvador, these changes represent an opportunity to position itself as a strategic trading partner. However, capitalizing on this moment will require public-private coordination, institutional strengthening, and a clear vision for export-oriented industrial development.