As the U.S. faces renewed debates over tariffs and the stability of USMCA (US-Mexico-Canada Agreement), the decision by the European Union and Mercosur to finalize a free trade agreement feels like a bold and unexpected move. After nearly 25 years of negotiation, these two economic powerhouses – representing over 800 million people– have forged a partnership poised to reshape global trade. While the agreement still awaits ratification, it raises an important question: how might this monumental shift impact Miami’s economy?
The stakes are high for Miami, as the EU-Mercosur agreement directly involves many of Miami’s key trading partners. In 2023, Miami traded over $17 billion with Brazil, $4 billion with Argentina, and $2 billion with Paraguay. On the European side, trade with the EU totaled more than $10 billion, primarily with France, Italy, Germany, and the Netherlands.
The new deal focuses on three key areas: trade, investment, and product standards. Mercosur nations have committed to improving agricultural quality and adhering to climate agreements like the Paris Climate Accord. For investment, the agreement lowers barriers to market entry. Most critically for Miami, it proposes eliminating tariffs on 90 percent of trade between the two blocs, opening EU markets to Mercosur agricultural exports, and giving Mercosur access to European manufactured goods like automobiles.
The deal presents significant challenges for Miami’s export economy. Historically, Miami has relied on Latin America to export manufactured goods such as aircraft parts, telephones, and computers. In October 2023, these items made up Miami’s top exports. While specialized goods might remain competitive, many of Miami’s manufactured exports could struggle against cheaper European alternatives.
Another major challenge will be navigating the global system of tariffs. While the U.S. has free trade agreements with numerous Latin American countries, including Panama, Colombia, and Chile, it has no such agreements with any of the members of the EU or Mercosur. Free trade agreements help facilitate trade by decreasing tariffs and other barriers, but their absence puts U.S. goods at a disadvantage. We have already seen the impact of these dynamics. During the U.S.-China trade war, tariffs on American soybeans caused U.S. exports to China to drop from $12.3 billion to just $3.1 billion, while Brazilian soybean exports to China soared. A similar trend could develop in other industries if the U.S. does not adapt its trade policies.
Despite these challenges, Miami can still find opportunities. The agreement could catalyze broader shifts in Latin America’s commodity markets, creating new openings for U.S. businesses. For instance, Brazil dominates coffee production, but changes in trade flows might influence other major growers like Colombia – one of Miami’s close trading partners – to increase production. Additionally, a stronger Mercosur could benefit Miami in unexpected ways. Brazilian and Argentine investors have already poured over $7 billion into Miami real estate. As these economies grow under the new agreement, increased capital could flow into Miami.
While the EU and Mercosur embrace free trade, the U.S. seems to be retreating into protectionism. Tariffs on Chinese steel, Brazilian beef, and other imports reflect this trend. As the European Commission stated, the EU-Mercosur agreement “sends a clear signal to the world that two of its largest economies reject protectionism and are open for trade on the basis of fair rules and high standards.” For Miami, a city built on its role as a bridge between the U.S. and Latin America, the rise of protectionism could be a significant setback. However, Miami’s strengths extend beyond commodities. Its burgeoning tech sector, financial services, and real estate market position it as a dynamic hub for international business.
Although the EU-Mercosur trade deal marks a turning point, its future remains uncertain. Persistent challenges, including protests in France over agricultural imports and Bolivia’s incomplete integration into Mercosur, could delay implementation. Miami and the U.S. have time to adapt – but only if they act strategically.
Marek Kong is a masters’ student at FIU School of International and Public Affairs for Latin American and Caribbean Studies.
