With his tariff threats, the United States (U.S.) president is currently pushing certain countries to reach agreements among themselves for better economic cooperation. This particularly applies to the cooperation between the European Union (EU) and South American countries.
U.S. President Donald Trump has clearly shown that he has no intention of respecting existing free trade agreements, not even with Canada and Mexico, whom he is threatening with 25% tariffs on all products.
Given the harsh rhetoric coming from Washington against the EU, from which the U.S. imports far more than it exports, similar measures can be expected against products from the EU.
However, such a protectionist policy can be particularly damaging to South American countries, for whom the U.S. was a main partner and who are now forced to find an alternative as soon as possible.
Last December, it was announced that negotiations on free trade between the EU and the Mercosur bloc had finally been completed, and these days, the Minister of Foreign Affairs of Uruguay Omar Paganini has been in Brussels, urging EU member states to ratify this agreement as soon as possible in order to “send a clear message to the world” that free trade, not protectionism, is the path to progress.
The inevitable cooperation between South America and the EU
As stated when the negotiations were concluded, this agreement would create a trade area of over 700 million people with a total economic potential of about 22 trillion U.S. dollars. It would include the 27 EU member states and four South American countries – among the major players are Brazil and Argentina, along with Uruguay and Paraguay.
South American countries are urgently seeking an alternative to the U.S. market because they are convinced they, too, will soon be hit with tariffs.
“This is a kind of shock therapy through tariff threats that Trump is trying to implement,” says Vladimir Rouvinski from Icesi University in Cali, Colombia. “He is not leaving Latin American governments much room, so they feel pressured.” In this sense, U.S. tariffs are an opportunity for these countries to turn to Europe, and for Europe to turn to Latin America.
Ingo Ploger, a German-Brazilian scientist and entrepreneur, also believes that “this agreement (between the EU and Mercosur) opens up great opportunities. It is about expanding what has already been agreed upon, in the strategic interests of both Mercosur countries and EU member states.” He points out that cooperation has long existed: many German and European companies operate in Brazil, and a free trade agreement would enable business expansion and further cooperation.
Is Europe losing the race?
However, Brazilian economist Gilvan Bueno warns that expectations for this agreement should not be too high. First, it took a good 20 years to reach any agreement at all, and even now, there is significant resistance. “All this shows that a trade partnership between Europe and South America cannot emerge quickly. We have also seen that there are many obstacles,” Bueno summarizes.
The President of the European Commission and the leaders of Mercosur countries have indeed announced the agreement, but it is still far from being ratified. France, along with some other EU countries, has already stated that the agreement “in its current form” is unacceptable, primarily due to strong opposition from European farmers. They simply cannot compete with production on the vast plantations and farms of Brazil and Argentina, where workers are paid miserably.
For Bueno, this hesitation is an indicator that Europe is falling behind in the global market race. “China can make decisions immediately, and the U.S. still has the leading currency – their dollar,” says the Brazilian expert. But even if EU members started approving the trade agreement with Mercosur countries one by one, it would be too late for the measures that Donald Trump is apparently preparing in the near future. In the best-case scenario, the EU-Mercosur agreement would come into force only in 2026.
What is Mercosur and why is it important?
Mercosur (Southern Common Market) is an economic and political union of South American countries, established to strengthen trade cooperation and economic development in the region. It was founded on March 26th, 1991, with the Treaty of Asuncion and today represents one of the most important trade blocs in the world.
Mercosur accounts for more than 260 million people and generates a GDP of over 2 trillion dollars, making it one of the largest economic integrations globally. It has trade agreements with the EU, China, and other major economies, facilitating exports and access to global markets.
Besides economic cooperation, Mercosur also plays a significant political role in the region, serving as a platform for dispute resolution and strengthening diplomatic relations among member states.
Despite challenges such as internal political disagreements and economic crises in some countries, Mercosur remains a key player in South American and global trade.
Who are the members of Mercosur?
The current full members are Argentina, Brazil, Paraguay, and Uruguay. Venezuela was admitted in 2012 but was suspended in 2016 for political reasons. In addition to full members, Bolivia is in the process of joining, while Chile, Colombia, Ecuador, Peru, Guyana, and Suriname are associated countries with special trade agreements.
What are Mercosur’s goals?
Mercosur was founded with the idea of creating a common market, and its key objectives include:
Free trade and the removal of customs barriers between member states; Facilitating the movement of people, goods, and capital within the bloc; Cooperation in various sectors, including politics, education, and the environment; Strengthening economic stability and competitiveness in the region.
