Trump's Economic Brinkmanship: Sanctions Threaten $30B US-Colombia Trade Link

Market snapshot: The geopolitical landscape in the Western Hemisphere has shifted dramatically as President Trump formalizes discussions on escalating sanctions against Colombia. This development follows the 2025 decertification of Colombia's counter-narcotics efforts and the personal sanctioning of President Gustavo Petro by the US Treasury's OFAC. The move signals a transition from diplomatic cooperation to a high-pressure tariff and sanction regime aimed at curbing record cocaine production and migration flows.

Summary: US-Colombia relations have reached a 30-year low as President Trump discusses new sanctions and potential military intervention to combat record cocaine output. With $28B-$30B in annual trade at stake, sectors including energy, coffee, and agriculture face significant tail risks.

Key Takeaways

• President Gustavo Petro and his inner circle were placed on the OFAC US Sanctions list in October 2025.
• Cocaine production in Colombia surged to a record 3,000 tons in 2024, prompting US decertification of its ally.
• The Trump administration is utilizing the IEEPA to consider broad tariffs on Colombian goods, including energy exports.

SAHI Perspective

For Indian investors, the primary exposure lies in the energy sector. Colombia is a significant crude oil exporter to India ($1.7B in 2024). Any disruption to Colombian energy production or shipping due to military operations or sanctions could tighten global supply, leading to a spike in crude prices. We anticipate heightened volatility in coffee futures and LatAm-focused ETFs as the White House meeting outcome unfolds.

Closing Insight

As the US pivots to a more aggressive Monroe Doctrine stance, the era of 'Plan Colombia' cooperation is dead, replaced by a mandate-driven sanctions policy that will reshape LatAm trade routes for the next decade.

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