by Manal Barakat, SeaNewsEditor

A trade agreement that could lower EU import tariffs by more than 90% as early as late 2025 is still pending. However, South American forwarders and shippers expect a significant rise in the backhauls of the Europe-to-Latin America trade lanes.

According to a report by the Journal of Commerce, the EU-Mercosur agreement, signed on 6 December, aims to lower the cost of importing goods such as wine, spirits, cars, machinery, communications equipment, textiles, and chocolate from EU countries to Mercosur countries, which include Argentina, Bolivia, Brazil, Paraguay, and Uruguay.

The backhaul of the trade has increased by just 1.4% over the last five years, reaching 1.57 million TEUs, according to data from GTAS, a sister firm of S&P Global's Journal of Commerce.

Considering the existing ratio of one import for every four exports going to Europe, Latin American sources suggest that any rise in quantities would impact the situation.

Analysts believe the significant tariff reductions could shift the trend of shippers seeking imports from countries other than Europe due to high costs. The agreement could also make the traditionally low-volume lane more attractive. 

The agreement, described by European Commission Vice President Kaja Kallas as creating “the world’s biggest free trade zone,” still requires approval from the European Parliament and the European Council.

If ratified, EU exports to Mercosur could be more competitive than US products by 2026, experts claim.