Will Trump rates accelerate Mercosur-UE agreement?

The US president climbed commercial tensions by accusing the European Union to maintain “hostile and abusive” stance with the US. Can protectionism approach Block to Brazil – Green Signal to the Agreement with Mercosur?

Commercial tensions between the United States and the European Union intensified this week after Brussels announced 26 billion euros (R $ 164 billion) in US goods, in response to 25% overwhelms implemented by Washington in steel and aluminum imports.

For analysts heard by DW, the hard rhetoric of US President Donald Trump regarding trade with Europeans generates opportunities for Brazilians. The assessment is that a trade war can accelerate the next steps of the agreement between EU and Mercosur, which was signed late last year, but still needs to be ratified by the European Parliament and the legislatures of each country country.

In a publication on the social network Truth Social on Thursday (13/03), Trump called the EU “one of the most hostile and abusive tariff authorities” in the world and said that the bloc was created with the primary purpose of “taking advantage” of the largest economy on the planet.

The Republican also threatened to apply 200% tariff to wines, champagne and alcohol beverages from France and other European countries.

EU trade commissioner at the time of the first Trump administration, Cecilia Malmstrom acknowledged that the scenario represents a “climbing conflict,” but said a trade war does not usually have winners.

“It’s a lost game,” he told DW before adding that the heaviest burden of tensions tends to fall on consumers, with consequences for inflation, employment and economic growth.

Former EU Common Procurers sees ‘Lost-Perde’ game at Business War | Virginia Mayo/ AP Photo/ Picture Alliance

Brazil should not immediately retaliate

In Brazil, also affected by steel and aluminum tariffs, the order is to maintain caution before negotiations. Finance Minister Fernando Haddad told reporters on Wednesday that the Brazilian government does not intend to retaliate immediately.

“We have negotiated other times in conditions even much more unfavorable than this. We will lead to consideration to the US government that there is a misconception of diagnosis,” he said.

A technical team led by the Ministry of Development, Industry, Commerce and Services (MDIC) has a meeting scheduled for this Friday (14/03) with representatives of the Trump administration. It will be the first opportunity for both countries to discuss the tariffs started this week. The vice president and chief of the portfolio, Geraldo Alckmin, however, will not participate in the meeting.

The efforts reflect the position of the steel industry for the Brazilian trade balance. By 2024, the country exported $ 3.2 billion in steel and aluminum to the US, according to the MDIC and the Ministry of Foreign Affairs.

In this environment, US tariff can impose a $ 1.5 billion loss on Brazilian steel exporters in 2025, according to estimates from the Applied Economic Research Institute (IPEA). The result is equivalent to a production drop of almost 700,000 tons in the year.

Urgency for new markets

Risks tend to encourage the country to seek new markets and make Mercosur agreement more urgent with the EU, says international law professor Alberto do Amaral, University of São Paulo.

In 2024, Brazil exported the equivalent of $ 48.27 billion to the EU, according to figures from the MDIC’s Foreign Trade Secretariat. The US shipments, in turn, totaled $ 40.36 billion last year.

“The great advantage of the celebration of the treaty stems precisely from the fact that the reduction of European and Brazilian exports to the US could be compensated for increasing trade exchange between the two blocks,” explains Amaral.

For him, the Brazilian economy would be particularly benefited, especially for access to European capital goods, which would contribute to the increased competitiveness of industry. “The benefited sectors would be those of trade in transportation, pulp, paper, as well as commodities and agricultural products,” he says.

The Professor of International Relations Vinicius Rodrigues Vieira, at the Armando Alvares Penteado (FAAP) University Center, also evaluates that the current environment is favorable to the free trade pact. In his view, the stagnation of the German industry and the growing European defense spending reinforces the need to open new consumer markets such as Mercosur.

On the other side of the coin, Vieira considers that Trump’s return to the White House can also influence the rise of ultra -right in Europe, more resistant to the liberalization of international trade. “His schedule can lead, in the medium term, forces to power in key countries, such as France, which would eventually overthrow the deal for good,” he warns.

French farmers have made a staunch opposition to the Mercosur-UE agreement | Previtali Leo/Abaca/Imago

UE-Mercosul Agreement still has risks

Ambassador José Alfredo Graça Lima, who has performed at the World Trade Organization (WTO) and in negotiations with the EU, is more skeptical about the agreement. The diplomat considers that Brazilian trade with the US has gained more strength in recent years, to the detriment of exchanges with Europeans. “The agreement has its value, but from a market access point of view, it is limited,” he says.

Graça Lima understands that ratification procedures are reproducing behavior observed in 2019, when the blocks even filed an agreement. Since last year’s announcement, a few steps have been taken toward implementation. “It is not possible that a legal review takes three months. It seems exaggerated as a deadline,” he argues, who is an advisor to the Brazilian Center for International Relations (CEBRI).

There is a particular opposition movement in France, where the powerful agricultural sector fears competition with South American products. Last year, President Emmanuel Macron’s party lost space in the National Assembly in an election that resulted in the advance of Marine Le Pene’s ultra -right from the most radical left.

Vieira, from FAAP, believes that Macron will avoid giving the agenda to rival groups. The French Parliament would need to endorse the most sensitive points of the agreement, such as environmental commitments. “It has no political climate, until the next electoral cycle, to approve the agreement in France,” he says.

‘Factor Malei’ also complicates

Across the Atlantic, the approach of Argentina’s president, Javier Milei, with Trump also complicates the process. The libertarian has already stated that he was willing to remove the country from Mercosur if necessary to close a treaty with the US, claiming that the customs union only served to enrich Brazilian industrialists.

Milei threatened to remove Argentina from Mercosur if necessary to approve agreement with US | Picture Alliance/DPA

For Ambassador Graça Lima, Milei’s movement represents an existential crisis for South American integration. “The moment Argentina signs an agreement or engaging in commercial negotiations with the US, Mercosur would be misrepresented, because it would no longer exist as a customs union that is obliged to complete agreements together between the four countries,” he explains.

Originally published by DW on 14/03/2025

By André Marinho with collaboration by Arthur Sullivan