It’s not Mexico that needs a trade deal with Europe, it’s the opposite.

For almost two decades Europe has been investing heavily inside Mexico, particularly noted in the auto industry, as they positioned themselves to take advantage of NAFTA and later the USMCA as an entry to the U.S. market.

European auto companies spent billions on assembly plants in Mexico, where they could ship EU manufactured component goods to be assembled into NAFTA/USMCA compliant vehicles.  As President Trump and USTR Lighthizer begin focusing on eliminating the USMCA trade agreement in favor of two bilateral deals (U.S-Canada and U.S-Mexico), Europe now needs to protect prior investment.

The prior Mexico-EU trade agreement has existed since 2000 (NAFTA timeframe).  In 2025 they agreed to a revised Free Trade Agreement (FTA) and finalized the terms and conditions yesterday.

MEXICO CITY, May 22 (Reuters) – Mexico and the European Union signed a long-stalled free trade agreement on Friday as they seek to decrease dependence on the U.S. and partially insulate themselves from U.S. President Donald Trump’s tariffs.

The accord, which they reached broad agreement on in 2025 but have delayed signing, expands a Mexico-EU trade accord from 2000, which covered only industrial goods. The new pact adds services, government procurement, digital trade, investment and farm produce.

Mexico’s President Claudia Sheinbaum, European Commission President Ursula von der Leyen and European Council President Antonio Costa are to sign the deal in Mexico City in their first summit in over a decade.

“This agreement is a true geopolitical statement,” Costa said on Friday, shortly after signing the agreement. “With the modernized global agreement, we are better prepared to face the challenges of our time.”

[…] Mexico’s economy ministry estimates the new agreement could increase Mexican exports to the EU from around $24 billion a year to $36 billion by 2030. The EU exports around $65 billion in goods annually to Mexico.

Trade between Mexico and the EU has increased 75% in a decade, dominated by transport equipment, machinery, chemicals, fuels and mining products.

The new deal provides duty-free access for almost all goods including farm products such as Mexican chicken and asparagus and European milk powder, cheese and pork, albeit with some quotas. (read more)

I love how Reuters uses the term “transportation equipment” to cloud the actual content, EU vehicle components for auto assembly.  Sometimes you just have to snicker at the silliness of it all.

In essence, in order for the EU to retain their investment status, they are telling Mexico they will import more chickens, pork, dairy and row crops.  All of it subject to “quotas” established as an outcome of analysis about what bureaucrats in Brussels will tell EU farmers they have to accept.

A conversation akin to, ‘we’re going to buy more vegetables in order to keep our auto manufacturing systems in place.’  However, once those EU vehicles like BMW are assembled in Mexico, then what?  It’s not like Mexican workers are going to be running to the showrooms to purchase exotic cars.

All of these maneuvers are designed around one central strategic intent, keep the auto assembly close to the USA market and then pay Mexican officials through roots and vegetables to negotiate the best bilateral trade agreement with the United States that keeps European investment alive.  Europe needs Mexico to think about -and represent- their interests when Mexico is negotiating a bilateral with Trump.