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Europe’s new pact with South America, its largest deal to date, could be a sign of how countries will diversify trade relationships as Donald Trump threatens tariffs.
By Ana Swanson
Ana Swanson reports on trade and international economics from Washington.
Dec. 6, 2024, 5:15 p.m. ET
Even before stepping back into the Oval Office, President-elect Donald J. Trump is prompting governments across the globe to rethink their trading relationships as they prepare for a four-year period in which business with the United States could become much more volatile.
Foreign officials and analysts say that Mr. Trump’s threats to impose tariffs on much of the rest of the world are encouraging some countries to try to diversify their trading relationships and find other avenues for their products as they seek to get ahead of a potentially damaging trade war.
A tie-up between the European Union and South America announced on Friday demonstrates the kind of shifting trade alliances that Mr. Trump’s presidency could bring. The European Union finalized its biggest trade deal to date, signing an agreement with members of Mercosur, a South American trade bloc that includes Argentina, Bolivia, Brazil, Paraguay and Uruguay.
If ratified, the deal will establish one of the largest trade zones in the world, lowering tariffs on cars, machinery and pharmaceuticals that move between the continents. That allegiance could put American exporters at a disadvantage, as many of the partner countries gain better trading terms with one another than they have with the United States. For instance, American farmers who want to sell beef, poultry and soybeans into Europe may find themselves boxed out by South American exports that will now gain access to the market with lower tariffs.
Trade relationships have been undergoing a seismic shift over the past eight years as the United States has backed away from its longstanding position as a champion of globalization and free-trade agreements. Mr. Trump’s first presidency included a sharp turn toward protectionism, as he negotiated deals globally but ended up leaving much higher tariffs in place against allies like Mexico and Europe, and competitors like China.
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