Brazil and Mexico are accelerating efforts to strengthen their bilateral economic relationship, fast-tracking negotiations for an expanded trade agreement as both countries brace for hefty tariffs announced by US President Donald Trump, set to take effect August 1. 

Presidents Luiz Inácio Lula da Silva of Brazil and Claudia Sheinbaum of Mexico held a phone call on Wednesday to coordinate their response to Trump’s tariff policy. The US administration has threatened a 50% tariff on Brazilian imports and a 30% tariff on certain Mexican goods not covered under the USMCA.

Telefonei nesta quarta-feira, 23 de julho, para a presidenta do México, @Claudiashein. Recordei o encontro que tivemos durante a Cúpula do G7, no Canadá, e agradeci pela presença do chanceler mexicano na Cúpula do BRICS, no Rio de Janeiro.

Ressaltei a importância de aprofundar…

— Lula (@LulaOficial) July 23, 2025

To advance negotiations, Brazil’s Vice President Geraldo Alckmin will lead a delegation of business leaders to Mexico on August 27–28. The trip is aimed at laying the groundwork for a deeper Brazil-Mexico trade integration, covering key sectors such as pharmaceuticals, agriculture, aerospace, and energy.

Lula stressed "the importance of deepening economic and trade relations between the two countries, especially given the current moment of uncertainty," reflecting a shared desire to reduce their economies' vulnerability to US trade decisions.

Existing frameworks and economic potential

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Brazil and Mexico already maintain Economic Complementation Agreements (ACE 53 and ACE 55), which lower or remove tariffs on about 800 product categories, approximately 12% of bilateral trade. ACE 55 liberalizes trade in automobiles and related components.

In 2024, bilateral trade between the two countries reached $13.6 billion, with Brazil posting a $2 billion surplus. While modest compared to Brazil’s $161.8 billion trade with China or Mexico’s $840 billion with the US, representing 80% of Mexico's exports, it represents untapped potential.

Additionally, Brazil leads in commodities and heavy industry, while Mexico’s strength lies in advanced manufacturing. These complementary sectors provide a foundation for expanded cooperation, particularly in technology-driven industries.

Geopolitical Tensions Behind Trump Tariffs

Trump’s aggressive tariff stance on Brazil is partly influenced by his defense of former Brazilian President Jair Bolsonaro, currently on trial for attempting a coup. Tensions escalated after US Secretary of State Marco Rubio revoked the visa of the Brazilian Supreme Court justice overseeing the case. Lula has strongly condemned such interference.

Mexico’s threatened tariffs focus on exports outside the scope of the United States-Mexico-Canada Agreement (USMCA). Despite Mexico’s cooperation with the US on border and security issues, the Trump administration has adopted a more aggressive trade posture, prompting Sheinbaum’s government to explore alternatives.

Latin America's integration challenge

The push for closer Brazil-Mexico economic ties highlights a fundamental weakness in Latin American economic integration. Only 14% of Latin America's trade takes place within the region, a lower proportion than anywhere else in the world. This stands in stark contrast to other regions like Europe or Asia, where intra-regional trade forms the backbone of economic relationships.

This lack of integration is particularly pronounced when examining Mexico's trade patterns. Around 80% of Mexico's exports are sent to US buyers, making it extraordinarily dependent on its northern neighbor. The massive scale of this relationship is evident in the $840bn of goods traded between the US and Mexico last year, dwarfing Mexico's trade with all other Latin American countries combined.

Brazil and Mexico are Latin America's two largest countries, but have historically been distant because of rivalry over regional leadership, differing levels of economic openness, and Mexico's singular focus on the US market, which is by far its largest trading partner. Mexico's integration into NAFTA (now USMCA) in 1994 further oriented its economy northward, creating supply chains and manufacturing networks that bypassed much of Latin America.

While both governments see mutual benefit, practical and political constraints may shape the outcome of these talks. Given Brazil’s upcoming elections and Mexico’s engagement in USMCA renegotiations, officials suggest that expanding the current trade deal may be more feasible than negotiating a comprehensive new agreement.