Milei–Trump agreement threatens Brazil’s presence in the Argentine market

The trade and investment cooperation agreement between the governments of American President Donald Trump and Argentine President Javier Milei, announced on November 13, has raised concerns among Brazilian industry leaders due to the possibility of changes in production chains, as well as the potential loss of Brazil’s competitiveness in the neighboring market.

The negotiations may harm Brazilian trade on different levels, according to specialists. Brazil exports mainly manufactured goods to Argentina, which account for more than 90% of shipments. From January to October this year, the sector generated USD 14.9 billion in revenue. The biggest question is how much Brazilian trade stands to lose.

To the United States, Brazil mainly sends grains and oils. Under the agreement, the country could lose sales in some of these segments in both markets. At the same time, with competitiveness at risk, Brazil may have more difficulty redirecting products that currently enter Argentina easily due to Mercosur.

Until October, Brazil posted a surplus of USD 5.1 billion with Argentina, the country’s third largest, behind only China (USD 24.9 billion) and the Netherlands (USD 7.8 billion). In the same period, almost 6% of Brazilian exports were destined for the Argentine market. On the import side, more than 4.5% came from Argentina.

One of the first direct effects of the Argentina–US agreement is the potential loss of market share for Brazilian products due to the entry of cheaper American goods in the neighboring country, says Marcela Franzoni, professor of international relations at Ibmec. One of the most threatened sectors is light vehicles, accessories and engines, which represented 45.5% of Brazilian exports to Argentina between January and October.

See below the history of Brazilian container exports to Argentina starting in January 2022. The chart was prepared using DataLiner data:

Brazilian Container Exports to Argentina | Jan 2022 to Sep 2025 | TEU

Source: DataLiner (Click here to request a demo)

Franzoni says that Brazil’s industry, which is not very competitive in several segments, risks losing even more space in traditional markets at a time when exports to China remain highly concentrated in oil and grains.

In addition, trade between Brazil and Argentina is consolidated in very similar products, especially within the automotive sector. For this reason, any possibility of new partners in this area — such as the United States — puts pressure on contracts.

She also highlights a second direct impact: the agreement “calls into question the continuity of Mercosur’s regulatory framework” and reinforces a trend — not only Argentine — to advocate transforming the bloc into a free-trade agreement with less institutional structure. This is because individual exports from Mercosur countries to China have increased, weakening the logic of regional productive integration.

According to Franzoni, the Argentine movement signals pressure for unilateral market opening while also reinforcing a historical feature of Latin American diplomacy: the difficulty of building robust multilateral negotiations.

Brazil’s advantage lies precisely in its commodity production capacity, which requires Argentina to maintain close ties with Brazilian exporters, says Federico Servideo, president of the Argentina–Brazil Chamber of Commerce.

He notes that the concrete effects of this agreement are still uncertain, as details and new meetings between Trump and Milei are still pending. One of them is scheduled for December 6, when the Argentine president will travel to Washington for the World Cup draw.

Servideo stresses that it is precisely those details that will define the real impact on trade flows, mainly because, until now, the agreement has proved unequal for the Argentines, demanding broad concessions — among them the automatic acceptance of all US technical regulations. This means that any medication approved in the United States would automatically be accepted in Argentina.

“The exceptions weaken the agreement from Argentina’s point of view,” says Servideo. He adds that the negotiation seemed unbalanced, with Argentina making 12 concessions while the US made only one, in addition to six unresolved issues. On the other hand, he notes that attracting US investment amid an economic crisis accelerated the deal, especially after the USD 20 billion bridge loan granted by the US to Argentina in October as part of an economic stabilization plan.

Some Argentine sectors may benefit, such as beef, which could increase shipments to the US from 20 thousand to 80 thousand tonnes. However, to achieve this, the country would need to rebuild its herds, which is not simple — a scenario that indirectly favors Brazil, explains Servideo.

He argues that the biggest impact of the agreement will occur in investment flows. While acknowledging a potential risk for some Brazilian exports, he believes that, for now, the commercial impact will be limited since “Argentina’s economy is only one quarter the size of Brazil’s.”

José Velloso, president of Abimaq, agrees. The main external customer for Brazil’s machinery and equipment sector is the United States, a position that fluctuated recently because of the tariff hike. In 2024, 26% of Brazilian exports in the sector were destined for the US, while Argentina accounted for 9%.

Even if the agreement between the White House and the Casa Rosada increases US competitiveness in the Argentine market, especially through tariff reductions, in the case of machinery and equipment, the impact tends to be limited. The partnership with Brazil will remain strong, since the segment is exempt from tariffs, which makes a significant market loss unlikely.

Brazil is the main supplier to Argentina in the sector, with 24.9% of the market (USD 16.1 billion) between January and October. The US supplied USD 5.8 billion (9% of the total). China is the second largest supplier, with USD 15 billion — up 61.3% compared with 2024 and 23.1% of the total, according to Indec, Argentina’s counterpart to the IBGE.

Argentina has lost industrial competitiveness over the last two decades and has become increasingly dependent on imported products from Brazil, China and the US, which reduces its ability to compete with American manufactured goods and makes an automatic replacement of suppliers with the new agreement unlikely.

In the first ten months of 2025, the US accounted for 9.2% of Argentine imports, behind China (10.8%) and Brazil (14.9%), according to Indec. Highlights were fuels and energy, with a 62.5% increase in US sales to the country over the same period in 2024.

Based on the data, Servideo notes that the US has a clear strategic objective: to reduce Argentina’s dependence on China. “Trump wants to replace China’s presence, not Brazil’s,” he says. Even so, part of Argentina’s industry sees risks, given the lack of domestic investment in modernization and competitiveness. Argentine business leaders expect market liberalization to bring opportunities in energy and mining, both priorities of the Milei administration.

Regarding the Mercosur–European Union agreement, Servideo states that it does not significantly hinder or strengthen the bloc. He sees productive integration as an inevitable path, especially in the automotive, chemical and energy chains, in a context in which Argentina needs to grow, rebuild reserves and improve its payment capacity.

Despite the political distance between Lula and Milei, Franzoni argues that the institutional structure of Mercosur tends to prevail over temporary divergences. And even with Trump strengthening ties with ideologically aligned leaders such as Milei, the cost for Argentina to leave the bloc is too high in the current economic crisis.

Source: Valor Econômico

Sharing is caring!