Mexico and Brazil aim to broaden trade agreement in preparation for August summit
The trade relationship between Mexico and Brazil is strengthening, with both countries focusing on negotiating an expanded trade pact to mitigate the risks posed by US tariff increases and leverage the complementary strengths of their industrial and agribusiness sectors.
Recent Developments
The strengthening of commercial ties between Mexico and Brazil comes amid uncertainty in their trade relationships with the United States, particularly with President Trump’s announced tariffs of 30% on imports from Mexico and 50% from Brazil, effective August 1, 2025.
Brazilian President Luiz Inácio Lula da Silva plans to send a delegation to Mexico in August 2025 to broaden the trade agreement, building upon the existing ACE 55 pact which currently eliminates tariffs on vehicles and auto parts. High-level talks have occurred between Lula and Mexico’s President Claudia Sheinbaum, emphasizing the importance of deepening economic and trade relations in light of US tariff pressures.
Sectors of Focus
The expanded trade pact is expected to focus on two key sectors: manufacturing and agribusiness.
Manufacturing
Mexico’s automotive, aerospace, and electronics manufacturing, known for low-cost labor and proximity to the US, complements Brazil’s industrial sectors such as machinery, chemicals, and components. Expanding trade ties can lower production costs by enabling seamless sourcing across borders.
Agribusiness
Brazil is the world’s largest exporter of soy and beef. Mexico is a significant importer of Brazilian agricultural goods (over $1 billion imported in early 2024). The pact aims to provide preferential access for Brazilian soy, meat, and dairy products, bypassing restrictions in existing agreements like USMCA and buffering against US tariffs.
Companies like Vale and Grupo México (mining inputs), JBS and Bunge (agribusiness giants) stand to benefit from reduced tariffs and expanded market access.
Potential Impact on Economies
The expanded trade pact could result in increased cross-border trade and investment. For Mexico, securing Brazilian commodities could diversify food supplies and reduce vulnerability to US tariffs. Brazil gains a larger export market inside Mexico and a strategic partner to mitigate US tariff impacts, which have complicated its trade in steel, aluminum, and other sectors.
The industrial synergy could enhance competitiveness for manufacturers in both countries by optimizing supply chains and reducing production costs, potentially boosting economic growth and employment in key sectors.
In summary, Mexico and Brazil are strategically deepening their trade relationship through expanded agreements focusing on manufacturing and agribusiness to mitigate adverse US tariffs, diversify markets, and leverage complementary industries. This collaboration is likely to positively impact both economies by facilitating increased trade flows, investment, and industrial cooperation in the near to medium term.
Notable facts: - Mexico's top export to Brazil was motor vehicle parts and accessories, accounting for 19.1% of all revenue earned from products shipped to the South American country. - A Mexico-Brazil trade pact signed in 2002 "sets the exemption or the reduction of import fees for some 800 types of products," Reuters reported last September.
- Amid the announced US tariffs of 30% on imports from Mexico and 50% from Brazil, the news of strengthening trade relations between Mexico and Brazil has emerged, with the focus on politics and economy.
- The expanded trade pact, which aims to provide preferential access for Brazilian goods such as soy, meat, and dairy products in the agribusiness sector, is expected to help Mexico diversify food supplies and reduce vulnerability to US tariffs, affecting the economy and business sectors.
- The technology sector could also benefit indirectly, as improved manufacturing synergy between both countries could lead to optimized supply chains and reduced production costs, potentially boosting economic growth and employment in key sectors like automotive, aerospace, and electronics manufacturing.
- As the potent impact on the economies of Mexico and Brazil becomes evident in the near to medium term through increased trade flows and investment, education-and-self-development opportunities may also emerge from this expanded collaboration, offering new possibilities for entrepreneurs and students interested in the fields of business and politics.
