The #TradeViews Team is officially back from vacation and ready to bring to you some clarity on all the most relevant trade updates. In this edition, we dive into the EU-Mercosur and EU-Mexico Agreements, new uncertainties looming over transatlantic trade, an upcoming agreement with Indonesia, what the India, Russia, and China summit might mean for the world trade order, and the announced partial suspension of the EU-Israel Association Agreement.
The EU-Mercosur deal, twenty-five years later
After 25 years of negotiations, the EU-Mercosur Partnership Agreement finally landed on the European Commission’s table on 3 September. The much-debated agreement is timely, as the EU looks to diversify its trade routes following the EU-US deal, and France, a major opponent of the agreement, faces a period of political instability.
In a move aimed at speeding up the legislative process, the Commission decided to split the agreement into two texts. First is the EU-Mercosur Partnership Agreement (EMPA), which covers political issues, cooperation, and trade aspects falling under the joint competence of the EU and its Member States. Second is the Interim Trade Agreement (ITA), which covers all parts of the deal falling under the exclusive competence of the EU, such as the much-debated rules on imports of agrifood products from Mercosur countries. While the former will need to be adopted by both the Council and European Parliament, together with all Member States, the second only needs a majority vote by the Council, following the European Parliament’s approval.
Overall, the deal wants to eliminate tariffs on over 90% of traded goods from both blocs, while introducing quotas for EU sensitive agricultural imports and upholding EU sanitary and food safety standards. The agreement also introduces a rebalancing mechanism, allowing either party to challenge measures taken by the other that nullify or impair the agreement’s benefits. However, this mechanism has been flagged as legally contentious, with some MEPs intending to challenge it before the EU Court of Justice – more on this here.
To appease EU countries and reassure European farmers, Brussels has also issued a separate legal act to operationalise the upcoming agreement’s safeguards chapter. This will require the Commission to monitor markets for changes in imports and prices of sensitive products and allows it to take ad-hoc measures on specific products, following a Member State’s request.
The agreement has been criticised by European farmers’ association like COPA-COGECA and by environmental NGOs, including CAN Europe. The automotive and tech industries praised the text. With stark divisions spanning across both party and national lines, the European Parliament will be the next crucial playing field. For instance, during the State of the Union on Wednesday, the EPP Group openly welcomed the deal, while the far-right PfE strongly condemned it. Make sure you don’t miss it and stay up to date with #TradeViews.
The Take: With an estimated €49 billion boost in annual trade, the Mercosur agreement is a strategic investment meant to give the EU breathing space after the tariff deal with the US. However, uncertainties surrounding the rebalancing mechanism and the content of the safeguards chapter risk fuelling, rather than tempering, European farmers’ expectations.
Zoom in: In the aftermath of the agreement’s presentation, France has softened its stance, while Poland reiterated its aversion to the proposal. Moreover, key MEPs in the trade committee (like Bernd Lange and Jörgen Warborn) have expressed their support for the deal.
Zoom out: Across the Atlantic, Brazilian President Inácio Lula expressed optimism about the prospect of ratifying the deal within a year; a sentiment shared by President Ursula von der Leyen, as the two leaders spoke on the phone last Friday.
New trade horizons in Mexico
Together with Mercosur, the European Commission also put forward a proposal for the adoption of the EU-Mexico Modernised Global Agreement. The MGA, in the making since 2016, will open up the Mexican market to EU agrifood products by removing high tariffs, simplifying exports procedures, and expanding protection of the Geographical Indications for 568 European food and drink products. The text will also include new commitments to cooperate on issues like climate change, human rights and organised crime.
Of note, the agreement includes significant new commitments to grant the EU access to minerals such as fluorspar, bismuth and antimony, fundamental for the chemicals, metals, and pharmaceuticals sectors. Indeed, the MGA fits within Brussels’ agenda to secure and diversify its supply of critical raw materials, as Mexico represents one of the key global suppliers of fluorspar. As for Mercosur, the MGA will also be complemented by an Interim Trade Agreement that includes all elements under EU exclusive competence and, once adopted, will remain in force until the Modernised Agreement enters into force.
The never-ending tale of EU-US trade relations
The trade bromance between the EU and the US just keeps on going. Last month, the two blocs finally issued a much awaited joint statement clarifying the terms of the deal concluded in July. The US maintained the 15% baseline tariff on basically all EU exports – including cars, pharmaceuticals, semiconductors and lumber. Brussels agreed to remove all duties from US industrial goods and seafood, together with significantly increased purchases in strategic American sectors, and an (estimated) boost in private investments in the US. The EU also pledged to hear the concerns on sustainability files (EUDR, CSRD, CSDDD, CBAM), while EU digital legislation was left out of the agreement. Tariffs on steel and aluminium currently remain at 50% – more about it here.
Although the statement seems to offer some temporary clarity, new challenges might be on the horizon. For starters, the text is still a political non-binding document, and several specific elements are yet to be defined at technical level. Tech could also be a contentious point. While the White House underlined that a Truth Social post hinting at new tariffs on countries implementing digital legislation was aimed at South Korea, Trump threatened new trade countermeasures on the EU after the Commission imposed a €2.95 billion competition fine on Google.
If that was not enough, the US’ new tariffs are undergoing legal scrutiny. Following a Federal Court’s ruling striking down Trump’s tariffs, the White House appealed in front of the Supreme Court, who will have the final say on the matter. Notably, if the Supreme Court agreed with the Federal Court, the US might have to unwind its trade agreement with the EU, although the US already has a plan to keep tariffs in place through different legal instrument. It also remains to be seen whether the European Parliament will vote in favour of the agreement as is, as MEPs’ opinions are growing increasingly divided. This division was further underlined during the 2025 State of the Union, where only the ECR and EPP Groups expressed overall support for the agreement (although EPP is concerned about the deal’s compatibility with global trade rules), while all other Groups stood united in underlining their discontent.
Europe’s Indonesian trade bet
The EU is seeking to offset tensions with Washington by opening new trade channels in Asia. In this context, President von der Leyen recently hosted the Indonesian president Prabowo Subianto to announce a new trade agreement after nearly a decade of trade talks. For now, the two parties only committed to work towards an ambitious free trade agreement. VDL underlined the deal will focus on trade in sectors such as agriculture, cars, and services. It would also cover the supply of strategic critical raw materials, as Indonesia is a key supplier of minerals needed for the green and digital transition, such as nickel, cobalt, and copper. Just like in Mexico’s case, the EU hopes Indonesia will allow Brussels to diversify and secure its supply of strategic raw materials.
It remains unclear how the agreement will address longstanding concerns over Indonesia’s import restrictions and its unpredictable regulatory system. Disputes at the WTO add further strain. While Jakarta recently won most of its claims in a case against EU countervailing duties on biodiesel, the EU’s challenge to Indonesia’s export ban on raw materials (like nickel used in EV batteries) remains unresolved, despite a WTO ruling in favour of the EU.
China’s new Arctic shortcut
On September 20th, a Chinese cargo ship will begin an 18-day journey from Ningbo-Zhoushan to Felixstowe, the UK’s largest container port. For companies that value speed, the route offers a clear advantage, shaving weeks off transit times. The inaugural voyage already sold out to Chinese e-commerce giants and manufacturers. If reliable, the Northeast Arctic Passage could become a new artery of global trade, giving China direct access to European markets. While the route is still seasonal and experimental, it reflects a wider rebalancing Europe cannot ignore. It also comes soon after China’s Shanghai Cooperation Organisation summit, attended by Putin, Kim Jong-Un and Modi, which served as a high-level networking hub for trade talks. During the meeting, leaders signalled a push toward multipolar trade governance, moving away from Western-led systems: bypassing sanctions and fostering South-South cooperation. Watch out, Brussels, the EU is not the only one trying to diversify!
Von der Leyen on trade with Israel
In response to the worsening of the humanitarian crisis in Gaza, the European Commission will propose a partial suspension of the trade aspects of the Association Agreement with Israel, as underlined by von der Leyen during her State of the Union speech. While the proposal marks the most extended positioning by the Commission on the matter so far, it is still unclear how such a suspension would look like in concrete terms. Moreover, to enact the measure, the Commission would need to secure the support of several Member States sceptical of Brussels’s previous attempts to sanction Israel, including Germany, Poland, and Hungary.
Over on X
Surely, everyone agrees
On the radar
30 September | The Atlantic Council will host the 4th annual Transatlantic Forum on GeoEconomics in Brussels, where leaders will discuss how the US and Europe can align on trade, technology, defence financing, and currency strategy.
20 November | The European Commission will be the venue of the upcoming EU Trade Policy Day. On the agenda, global trade rules, the value of new and old alliances, and economic security.
What we’re reading
Third time’s the charm: You would think that after Max Schrems successfully struck down two data flows deals between the EU and US, getting rid of a third one would be a walk in the park. It seems that the French MP Philippe Latombe did not follow Schrems’ playbook, though, as his plea to annul the EU-US Data Privacy Framework was rejected by the EU General Court. Good news for business!
BFFs: Presidents Macron and Merz, along with ministers, met late August to bring “bilateral coordination to full swing for a more sovereign Europe” under the guise of Franco-German Economic Agenda. Trade is a central pillar among eight other policy areas, focusing on a pragmatic agenda for trade agreements, ensuring a global level playing field and efficient implementation of European economic security measures.