EU’s ‘MERCOSUR takes effect tomorrow 1 May 2026
China eats the EU's lunch and dinner.
I have posted several articles about the ‘deal’ the last one here
Which concluded with this:
“The EU is a union of socialist republics (EUSR) much like the Union of Soviet Socialist Republics- (USSR) – both centrally planned with rules set by a politburo.
Is it a coincidence that the effective date of the agreement is ‘ May day’?
“Symbol of Internationalism: The holiday embodies the Marxist slogan “Workers of the world, unite!” It serves as a global platform for communists to demonstrate their strength, recruit new members, and protest against imperialist aggression and capitalist exploitation.
Global Communist Tradition: The date became integral to communist identity across Eastern Europe, China, Cuba, and Vietnam, with mandatory parades and workplace decorations. Even in non-communist Western nations, May Day remained a critical occasion for socialist and labor parties to highlight workers’ rights and oppose Cold War policies.
Here is an article that puts the Mercosur agreement in context:
Analysis-EU kickstarts Mercosur pact to counter US trade hit
“BRUSSELS, April 30 (Reuters) - The European Union and South American bloc Mercosur will implement on Friday a contentious free trade agreement that the EU in particular hopes will benefit exporters and calm critics, even if it cannot fully offset the blow from U.S. tariffs. “
“The European Parliament, whose approval is required, voted in January to challenge the agreement in the EU’s top court, which could take up to two years to rule, but the European Commission decided to provisionally apply the deal from May 1.
Supporters hope the EU’s largest ever agreement in terms of tariff reductions, which took 25 years to negotiate, will swiftly benefit EU exporters so that when the EU assembly does vote, perhaps in two years’ time, the advantages will be clear.
Alongside Mercosur, the EU has rushed to conclude trade agreements with India, Indonesia, Australia and Mexico since Trump’s re-election. ”
Here’ some guesswork around the impact on EU GDP.
“The European Commission has estimated the Mercosur agreement will boost EU GDP by 0.05% in 2040, while the India agreement, which the EU has dubbed the “mother of all deals”, could add 0.1% to GDP, according to the Kiel Institute for the World Economy.
All the wheeling and dealing by the top EU trade negotiators MIGHT - add - maybe 0.6% to EU GDP in the next 10-15 years. Wow!
“The European bloc is also hoping the agreements will help offset a decline in exports to the United States of 15% or more and a hit to GDP of some 0.3% this year alone.”
All reductions in the US current account deficit INCREASE US GDP.
2024 Full Year: The deficit widened by $228.2 billion, or 25.2%, to $1.13 trillion, representing 3.9% of GDP (up from 3.3% in 2023).
2025 Full Year: The deficit narrowed by $69.3 billion, or 5.8%, to $1.12 trillion, representing 3.6% of GDP.
Q4 2025: The deficit narrowed sharply by $48.4 billion (20.2%) to $190.7 billion, the lowest level since Q1 2021. This quarter’s deficit was 2.4% of GDP, down from 3.1% in Q3 2025.
A contraction from 3.6% of GDP to 2.4% has(X-M) increased US GDP by 1.2% on its own. – you can plug your own numbers into the formula GDP= C PLUS G PLUS I PLUS (x-m) lots of I (trillions) on the way! Reductions in the current account deficit will be reflected in the US fiscal deficit.
Back to the MSN article about EU trade deals.
“Maximiliano Mendez-Parra, principal research fellow at ODI Global, said much had changed since he co-authored a report for the European Commission in December 2020 that forecast a 0.1% increase in EU GDP from the EU-Mercosur deal. Since then China has ramped up sales of vehicles and machinery, items that the EU wants to export, Mendez-Parra said.
All about China:
“Global Trade Alert estimated that U.S. tariffs led to some $150 billion of Chinese exports being redirected, with absorbing more than $70 billion of extra Chinese goods, and sharp increases, too, for Latin America, sub-Saharan Africa and the Gulf.
So, while the EU’s trade accords should help, the EU will not offset lost U.S. exports without looking internally. Some 60% of EU exports are from one EU country to another and a more efficient and competitive single market could easily compensate.”
Much of those increased Chinese exports to other ASEAN countries, Latin America, sub-Saharan Africa and the Gulf will find their way into the EU via re-exports.
“So, while the EU’s trade accords should help, the EU will not offset lost U.S. exports without looking internally. Some 60% of EU exports are from one EU country to another and a more efficient and competitive single market could easily compensate.
Ho ho ho! ‘a more efficient and competitive single market’! There’s those flying pigs again!
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