EU and Mexico Reach New Trade Agreement As Trump Threatens Both With New Tariffs

The European Union and Mexico reached a deal Friday to overhaul their trade agreement, strengthening their partnership amid threats by President-elect Donald Trump to impose a new round of tariffs on both its neighbor and the trade block.

The "global agreement" between the European countries and Mexico will expand opportunities in services, strengthen supply chains and bolster investment protections, according to Politico.

"This landmark deal proves that open, rules-based trade can deliver for our prosperity and economic security," European Commission President Ursula von der Leyen said when discussing the deal. The bilateral trading relationship is worth more than €100 billion a year— four-fifths in the form of goods and one-fifth in services.

The agreement, which still needs to be ratified by both sides, aims to boost both trade and economic security by de-risking supply chains, securing a sustainable supply of critical raw materials and tackling climate change, according to a European Commission statement on Friday.

This new deal is the latest in the EU's efforts to expand its trade defense measures and boost national security, according to Bloomberg. Just last month, the EU and the Mercosur bloc, comprised by Brazil, Argentina, Paraguay and Uruguay, finalized negotiations on a trade partnership.

Mexico and the EU's strengthened relationship comes just days before President-elect Trump, who campaigned on an "America First" rhetoric and enacting new tariffs, takes office. The incoming president has suggested imposing 25% tariffs on its neighbors Mexico and Canada, and 10% to 20% tariffs on the EU.

Amid these threats, Mexico has been reportedly working to revamp the trade deal with the EU ahead of Trump's inauguration as a way to show strength before the review of the US-Mexico-Canada trade agreement, known as USMCA, scheduled for 2025, according to Bloomberg.

Trump's proposed tariffs could hit more than $900 billion worth of goods from Mexico and Canada, including huge volumes of autos, auto parts and energy products. The two countries account for nearly one-third of U.S. goods imports, which totaled about $3.1 trillion last year, according to Politico.

Mexican President Claudia Sheinbaum has been vocal about her critics on the tariffs and how her country could respond if they become a reality.

Last month, during a news conference, Sheinbaum read from a letter she said she planned to send to Trump in which she warns that Mexico will retaliate with tariffs targeting U.S. imports if he follows through. She said Trump's proposed tariffs would spark a trade war that escalates "until we put our common businesses at risk," she warned in Spanish.

"For example, Mexico's main exporters to the U.S. are General Motors, Stellantis and Ford Motor Company, which came to Mexico 80 years ago. Why put a tax on them that puts them at risk? It is not acceptable and would cause the U.S. and Mexico inflation and job losses," she continued.