This past weekend, the European Union signed a comprehensive free trade agreement with the Mercosur bloc comprising Argentina, Brazil, Paraguay, and Uruguay. This marks the culmination of more than a quarter-century of negotiations. When fully implemented, the pact will create one of the world’s largest free trade zones, encompassing more than 700 million people.
At a moment when the United States is retreating into tariffs, trade threats, and ad hoc deals shaped by President Donald Trump’s sensibilities, the rest of the world is pursuing openness through durable, rules-based agreements. Unless the Trump administration soon reverses course, the U.S. will bear the economic and geopolitical costs of that divergence for years to come.
The scope of the EU-Mercosur agreement is impressive. Mercosur eliminates duties on 91% of EU exports, including tariffs as high as 35% on cars and spirits, while the EU will phase out tariffs on 92% of Mercosur exports. For EU exporters alone, removing these barriers is expected to save more than $4.6 billion per year in duties. Although quotas and safeguards were included to appease European agricultural interests, the agreement nonetheless represents a significant step forward in liberalizing trade between the two economic blocs.
The economic logic is straightforward. By reducing trade barriers, signatories can play to their comparative advantages, focusing on what they do best. Flows of goods that leverage EU strengths, such as cars, machinery, and pharmaceuticals, will increase to Mercosur, while more raw materials and agricultural products will head in the opposite direction.
Trade in services will also grow. The European Commission estimates that by 2040, tariff elimination and services liberalization will boost EU exports by roughly $57 billion and Mercosur exports by $10.5 billion. Beyond these wins for exporters, both sides will also benefit from lowered import costs.
The contrast with the U.S. is stark.
Rather than negotiating comprehensive trade agreements, Trump has settled for thin bilateral deals that offer only modest market access in return for limited relief from his sweeping tariffs. While the EU is securing broad, reciprocal access to Mercosur markets, the Trump administration has concluded just one agreement with a Mercosur country — Argentina — and even that amounts to a narrow framework rather than a full-fledged free trade pact. Many Argentine exports remain subject to Trump’s misnamed “reciprocal” tariffs, and Argentina’s commitments fall well short of the access the EU has secured.
It is symptomatic of the broader U.S. approach. Similar framework-style deals were reached with the United Kingdom and Vietnam last year, yet both countries already participate in far more ambitious trade liberalization through the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, concluded in 2023.
As the U.S. seems content with higher trade barriers and limited deals, the rest of the world is positioning itself to reap the benefits of greater openness. And Trump may be inadvertently accelerating that process.
On the heels of its Mercosur deal, the EU is reportedly moving rapidly toward a trade agreement with India. One reported reason for the urgency is New Delhi’s desire to diversify its economic relationships after being hit with higher U.S. tariffs and political pressure over its purchases of Russian oil.
Wariness over Trump’s erratic trade policies may also have contributed to sealing the EU-Mercosur agreement after 25 years of negotiations. In her comments about the trade deal, European Commission President Ursula von der Leyen warned that trade was being “weaponized” and noted the “dangerous, transactional” nature of current realities. The rebuke of Trump was thinly veiled.
Simply put, other countries are opting to take their business elsewhere. As Harvard University economist Robert Lawrence put it, the president’s policies are helping to “create a world without America.”
Trump’s high-pressure tactics and unpredictability may generate headlines and burnish his image as a deal-maker. But they do little to advance U.S. prosperity. American manufacturers face higher input costs due to tariffs, while foreign competitors gain preferential access to fast-growing markets abroad. This is not savvy negotiation but economic self-harm.
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Great trade deals expand opportunity and establish frameworks that endure. They secure market access not just for today, but for decades to come. By that standard, the current U.S. trade record reflects contraction, not triumph.
The EU-Mercosur agreement underscores a broader reality: the world is moving forward with or without the U.S. Countries seeking growth and influence are choosing openness over obstruction. If America continues to choose tariffs instead, it should not be surprised to find that the future of trade and its attendant benefits are shaped without it.
Colin Grabow is associate director at the Cato Institute’s Herbert A. Stiefel Center for Trade Policy Studies.