Latin America's New Trade Agreements in an Age of Protectionism

“Great powers have begun using economic integration as weapons…tariffs as leverage, financial infrastructure as coercion, supply chains as vulnerabilities to be exploited…”
Mark Carney, Canadian Prime Minister, Davos 2026

Amid heightened global uncertainty, countries are increasingly diversifying their trade and investment ties beyond traditional partners, turning to institutional frameworks such as Mercosur (Southern Common Market) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Within this context, Latin America has emerged as a region of growing strategic importance, attracting heightened interest not only from the United States, China, the European Union (EU) and the United Kingdom, but also from a broader range of global actors. This renewed attention is driven by several factors, including the region’s abundant natural resources, its role as a major supplier of critical minerals, and its central importance for global food security, elements that are increasingly vital to energy transition strategies and long-term economic resilience.

After a quarter-century of negotiations, the EU reached a breakthrough on 9 January 2026, when a qualified majority of member states approved the long-awaited trade deal with the Mercosur partners, Argentina, Brazil, Paraguay and Uruguay. A week later, the 27-member EU and South America’s Mercosur marked a major milestone by signing, in Paraguay, one of the world’s largest free trade agreements. On 1 May, the EU-Mercosur interim Trade Agreement (iTA) entered into force on a provisional basis. European lawmakers requested a judicial review, meaning that the European Parliament may have to wait up to two years, alongside ratification by the Parliaments in all 27 EU member states, before it can hold a final consent vote on the full partnership agreement, which will ultimately supersede the iTA.

One of the main reasons the EU-Mercosur trade agreement remained stalled for more than two decades was opposition from France and other EU members, which demanded stronger environmental safeguards and raised concerns about potential losses for European farmers. As a result, from a sustainability perspective, this deal is among the most ambitious trade agreements concluded to date, setting out clear commitments to address the implementation of the Paris Agreement, the fight against deforestation, the enforcement of environmental regulations and the strengthening of climate action. In parallel, the EU has committed €1.8 billion through the Global Gateway initiative to support Mercosur’s digital and green transformation.

The EU- Mercosur deal will eliminate more than 90% of bilateral tariffs, reduce non-tariff barriers, and open new markets for a wide range of goods and services, while requiring parties to uphold core international labour standards. While Brazilian exports to fellow members currently account for nearly half of intra-Mercosur trade, the bloc -bolstered by Bolivia’s recent accession-, has gained renewed momentum following the EU’s approval of the trade deal. This agreement underscores Latin America’s growing role as a reliable partner for Europe and other economies amid profound shifts in global value chains. As the European Commission President Ursula von der Leyen highlighted in Asunción, “this agreement sends a very strong message to the world. It reflects a clear and deliberate choice. We choose fair trade over tariffs. We choose a productive, long-term partnership over isolation”.

Once fully ratified, the EU-Mercosur accord will create the world’s largest free trade zone, encompassing a market of over 770 million people and nearly a quarter of combined global GDP, estimated at €18 trillion. According to Santander, once fully ratified, the agreement will extend the EU’s trade network to cover 97% of Latin America’s GDP. This would give the EU a level of market access roughly twice that of the United States, while China currently benefits from preferential access to 14% of the region’s market. This would confirm the EU as the most firmly established external partner in the region, with trade agreements covering all Latin American and Caribbean countries except from Bolivia, Cuba and Venezuela.

In North America, attention is also turning to the strengthening of EU-Mexico relations. During the 8th EU-Mexico Summit that will take place on 22 May, the parties are expected to sign the Modernised Global Agreement, which will update and deepen political, economic and trade framework that has underpinned bilateral relations for the past 25 years.

Conversely, the CPTPP is the first major trans-Pacific agreement in which the majority of the economies on the eastern Pacific rim are Latin American, namely Chile, México and Perú. Costa Rica concluded accession negotiations with the CTPP working group on 6 May 2026. Ecuador has formally applied for membership, while Uruguay has also expressed its intention to accede to the agreement. 

The CPTPP also aims to eliminate or significantly reduce tariffs on the vast majority of goods traded among its 13 members countries: Australia, Brunei, Canada, Chile, Costa Rica, Japan, Malaysia, Mexico, New Zealand, Perú, Singapore, the United Kingdom, and Vietnam. It is widely recognised as one of the world’s most progressive free trade agreements, featuring ambitious provisions on digital trade, e-commerce, services, and the protection of intellectual property. In 2025, the collective value of the CPTPP economies accounted for approximately 15% of global economic output, surpassing £12 trillion, and encompassed a population of over half a billion people.

The United Kingdom officially joined the CPTPP on 15 December 2024, becoming both the first non-founding member and the first European country to accede to the agreement. Mexico ratified the UK’s accession on 10 December 2025, enabling both parties to benefit from the agreement’s trade provisions in its trade from 22 June 2026 onward. Canada’s approval now remains the only outstanding step.

Trade agreements require sustained political will and strong commitment from all parties involved. Taken together, the EU-Mercosur agreement, the CPTPP, and the more recent trade agreements concluded by the US government with Argentina, El Salvador, Ecuador, and Guatemala signal a significant deepening of transregional trade integration with Latin America. These developments not only reinforce the region’s growing strategic importance in global trade, but also underscore a clear shift towards deeper economic engagement and a diversification of partnerships amid increasing geopolitical fragmentation.

 

Chris Elmore MP, Parliamentary Under Secretary of State for Latin America and the Caribbean addresses a gathering on CPTPP in Mexico City, May, 2026.