The European Union and Mexico announced a landmark trade agreement on Friday, finalizing nearly a decade of negotiations. This modernized pact seeks to diversify their economic ties and reduce reliance on the United States, especially as President-elect Donald Trump threatens new tariffs on both parties.
The agreement, an update to a 20-year-old trade pact, follows the EU's recent deal with the Mercosur trade bloc and demonstrates both parties' commitment to open, rules-based trade.
“This landmark deal proves that open, rules-based trade can deliver for our prosperity and economic security, as well as climate action and sustainable development,” said Ursula von der Leyen, President of the European Commission.
Key Provisions:
- Tariff Reductions: Mexico will remove tariffs of up to 100% on EU goods, including cheese, poultry, pork, pasta, and wine.
- Geographic Protections: Over 500 EU products like champagne, Parma ham, and Rioja wine will have name protections in Mexico.
- Electric Vehicles: Mexican electric vehicles can enter the EU duty-free if at least 60% of their components are from Mexico or the EU, limiting Chinese manufacturers’ ability to use Mexico as a gateway.
- Increased Access: The EU will raise low-tariff quotas for Mexican goods such as beef, poultry, and ethanol.
The agreement is seen as a hedge against Trump's proposed 25% tariffs on Mexican exports to the US, which would heavily impact a nation sending over 80% of its exports to its northern neighbor.
“It is very positive. It will give certainty to investors and is a vote of confidence in Mexico,” said Carlos Serrano, BBVA Mexico’s chief economist.
While the agreement stalled for years over Mexico's reluctance to open its energy market to EU firms, President Claudia Sheinbaum’s administration has committed to presenting new energy investment rules in February, paving the way for progress.
The deal, which still requires approval by EU and Mexican lawmakers, is expected to face resistance, particularly from European farmers concerned about the influx of Mexican agricultural products.
By including labor rights, climate protections, and a dispute resolution mechanism, the deal aligns with the EU’s broader goals for sustainable trade while providing Mexico with opportunities to diversify its export markets.
