Open the White House Watch newsletter for free

Your guide to what the 2024 US elections mean for Washington and the world

The European Union and Mexico have agreed to a long-awaited trade deal as they seek to reduce their dependence on the United States days before Donald Trump returns to the White House.

After nine years of negotiations, the two sides said on Friday that they would work to update their current agreement. The announcement comes just weeks after Trump threatened them with tariffs, and comes on the heels of a similar trade agreement between the European Union and the South American trading bloc. Mercosur In December.

“This landmark agreement proves that open, rules-based trade can deliver our prosperity and economic security, as well as climate action and sustainable development,” said Ursula von der Leyen, President of the European Commission.

EU-Mexico trade in goods reached €82 billion in 2023, while two-way trade in services reached €22 billion in 2022.

Mexico will remove tariffs of up to 100% on EU exports including cheese, poultry, pork, pasta, jams and marmalades as well as chocolate and wine. Mexican producers will not be able to use protected names for more than 500 products including Champagne, Parma ham and Rioja wines.

The deal will allow Mexico to export electric vehicles duty-free to the EU if they contain at least 60 percent Mexican or EU-manufactured components by value.

This will make it difficult for China to try to use Mexico as a manufacturing base for electric cars destined for the EU, as it will pay the standard 10 percent duty if it uses Chinese batteries. “Companies will be much better off by sourcing in Europe…from China,” an EU official said.

The European Union will increase low tariff quotas on Mexican exports such as beef, poultry and ethanol.

The two sides reached a tentative agreement in 2020 to expand the 20-year-old agreement, but the decision was delayed in part by Mexico’s reluctance to open its energy market to EU companies. President Claudia Sheinbaum’s left-wing nationalist Morena party reversed the broader opening of the market, causing new private investment in the sector to collapse. It has now said it will introduce long-awaited new rules for energy investment in February.

The official added that EU companies will receive the same treatment as Mexico’s other preferential trading partners, including the United States and South Korea.

Mexico is one of the most vulnerable countries in the world Trump’s tariff threatsIt sends more than 80% of its exports to the United States. This deal could help provide options for exporters if the new president implements the 25 percent tariffs he promised, but it is also an important signal.

“It is very positive… It will give certainty to investors because it will include protection mechanisms,” said Carlos Serrano, chief economist at BBVA Mexico. “It is a vote of confidence in Mexico and also shows that Mexico wants to ally with the United States and Europe.”

Dmitry Grozobinsky, of consultancy ExploreTrade, said “turbulent times” had prompted the two sides to resolve final outstanding issues.

“As the Trump administration and its attendant uncertainties loom, those bent on projecting stability, like Mexico and the European Union, are suddenly finding concessions to let the ink dry on their deals before the global tables begin to turn.”

The EU said the deal, which includes investment provisions, will help grow the bloc’s services exports in key areas, such as financial services, transport, e-commerce and communications, and protect intellectual property rights more effectively.

It also includes legally binding commitments on labor rights, environmental protection, climate change and responsible business conduct, governed through dispute resolution procedures.

The deal must still be signed and then approved by lawmakers in the European Union and Mexico. European farmers have protested the Mercosur deal and will likely put pressure on governments to resist ratification of the agreement with Mexico as well.