The EU and Mexico have agreed on a long-delayed trade deal as they seek to reduce their dependence on the US, hours before Donald Trump returns to the White House.
After nine years of negotiations, the two sides announced on Friday that they would modernize their existing agreement. The announcement came just weeks after Trump threatened tariffs and follows a similar trade deal signed in December between the EU and the South American trade bloc Mercosur.
“This landmark agreement proves that open, rules-based trade can ensure our prosperity and economic security, as well as climate action and sustainable development,” said European Commission President Ursula von der Leyen.
EU-Mexico trade in goods reached €82 billion in 2023, while two-way trade in services amounted to €22 billion in 2022.
Under the agreement, Mexico will eliminate tariffs of up to 100% on EU exports, including cheese, poultry, pork, pasta, jams, marmalades, chocolate, and wine.
Mexican producers will no longer be able to use the protected names of more than 500 products, such as champagne, Parma ham, and Rioja wine.
The agreement will allow Mexico to export duty-free electric vehicles to the EU if they contain at least 60% Mexican or EU-made components by value. This will make it more difficult for China to use Mexico as a production base for electric vehicles exported to the EU, as they will pay a standard 10% tariff if they use Chinese batteries.
“Companies will prefer to source from Europe rather than China,” an EU official told the Financial Times (FT).
The EU will also increase low-tariff quotas on Mexican exports such as beef, poultry, and ethanol.
The two sides had reached a preliminary agreement to extend the 20-year agreement in 2020, but the decision was delayed in part because of Mexico’s reluctance to open its energy market to EU companies.
EU companies will be treated the same as Mexico’s other preferential trading partners, including the US and South Korea, the official added.
Mexico, which exports more than 80% of its goods to the US, is one of the most vulnerable countries in the world to Trump’s tariff threats. The agreement with the EU could help provide exporters with alternatives if the new president implements his promised 25% tariffs.
Carlos Serrano, chief economist at BBVA Mexico, said: “This is very positive because it will give certainty to investors, as it will include protection mechanisms. It’s a vote of confidence in Mexico, and it also shows that Mexico wants to be aligned with the US and Europe.”
Dmitry Grozoubinski of the consultancy ExplainTrade said “turbulent times” had pushed the two sides to resolve the last remaining issues.
The EU stated that the deal, which also includes investment provisions, would help boost the bloc’s exports of services in key areas such as financial services, transport, e-commerce, and telecommunications, while also protecting intellectual property rights more effectively.
The agreement also includes legally binding commitments on labor rights, environmental protection, climate change, and responsible business conduct, overseen by a dispute settlement procedure.
The agreement still needs to be signed and then ratified by EU and Mexican lawmakers.
European farmers have protested against the Mercosur agreement and are likely to pressure their governments not to ratify the agreement with Mexico.
