EU, Mexico Seal Trade Deal: A Boon for Investors

The European Union (EU) and Mexico have finally sealed a modernised trade agreement, marking a significant milestone in their economic relations. The deal, which was concluded on 17 January 2025, promises to deepen and widen political, cooperation, trade, and investment relations between the two parties. As investors, we should take note of this development, as it presents new opportunities in various sectors.

The EU was Mexico's third-largest trading partner in 2023, with bilateral trade in goods amounting to €81.7 billion. The EU was also Mexico's second-biggest export market, with key imports including machinery and appliances, transport equipment, mineral products, and chemical or allied industries. Meanwhile, the EU's key exports to Mexico consisted of machinery and appliances, transport equipment, chemical products, and base metals. The EU continues to register a trade surplus with Mexico, which increased from €21.1 billion in 2022 to €24.6 billion in 2023.

The new trade agreement will bring several benefits to both parties, including:

1. Increased EU agri-food exports: The removal of high tariffs on EU agri-food exports will benefit European farmers by making their products more competitive in the Mexican market. This will likely lead to an increase in EU agri-food exports to Mexico, as European farmers will be able to sell more of their products at lower prices.
2. Easier access to Mexican government contracts and investment opportunities: EU companies will have better access to Mexican government contracts and investment opportunities, particularly in sectors such as public procurement, services, and energy. This will open up new avenues for European businesses to expand their operations in Mexico.
3. Simplified standards and procedures for small businesses: The modernised agreement will provide extra benefits for small businesses through simplified standards and procedures. This will facilitate growth for small businesses in both the EU and Mexico by reducing barriers to trade and making it easier for them to operate across borders.

As investors, we should consider the following sectors and companies that are likely to benefit from the EU-Mexico trade deal:

1. Agriculture and food processing: European agri-food companies, such as Danone (EPA:BN), Nestlé (EPA:NES), and Unilever (EPA:UNA), may see increased demand for their products in Mexico due to the removal of tariffs.
2. Machinery and appliances: European companies specialising in machinery and appliances, such as Siemens (EPA:SIE), Bosch (EPA:BOE), and ABB (EPA:ABBN), may benefit from increased exports to Mexico.
3. Transport equipment: European companies involved in the production of transport equipment, such as Volkswagen (EPA:VOW3), BMW (EPA:BMW), and Airbus (EPA:AIR), may see increased demand for their products in Mexico.
4. Chemical products: European chemical companies, such as BASF (EPA:BAS), Evonik (EPA:EVK), and Lanxess (EPA:LXS), may benefit from increased exports to Mexico.

In conclusion, the EU-Mexico trade deal presents new opportunities for investors in various sectors. By understanding the key benefits of the agreement and identifying the companies likely to benefit, investors can make informed decisions about where to allocate their capital. As always, it is essential to conduct thorough research and consider the risks associated with each investment before making a decision.