Tariff reductions would be gradual, beginning with a quota. Argentina’s local automotive industry, unlike Brazil’s, saw declines in production and exports in 2025 and would also need to export vehicles to Europe.
The free trade agreement between Mercosur and the European Union could become the final link in the chain that definitively connects Argentina’s automotive market with the rest of the world.
Although the details have not yet been disclosed, there are two different ideas regarding how the tariff benefit for importing cars from Europe into Argentina would be applied.
Because the origins of the trade agreement between Mercosur and the European Union date back nearly 25 years, some argue that there would be an initial seven-year phase during which a limited quota of units could be imported (50,000 vehicles per year), to be shared between Argentina and Brazil. In the second phase, a progressive reduction of the 35% tariff would begin, eventually bringing it down to zero.
However, updating the original project to reflect modern times and the automotive industry of the 21st century, a gradual tariff-reduction scheme could be implemented. This would start with a reduction of the 35% tariff to 25% exclusively for electrified vehicles (hybrids and fully electric vehicles), while for vehicles with internal combustion engines, a quota of around 15,000 units would be established, importable at a rate of 17.5%.
The current scenario
At present, the Economic Complementation Agreement with Brazil (ACE 14) allows all vehicles manufactured in both countries to be imported and exported between them without any import tariffs. Three other similar agreements also allow vehicles to be traded tariff-free with Uruguay, Colombia, and Mexico.
Since last year, a quota of 50,000 hybrid and electric vehicles per year authorized by the Argentine government has made it possible to import vehicles using this technology that are manufactured outside the region and have a tax-free price of USD 16,000, without applying the Mercosur common external tariff of 35% that is normally charged in Argentina and Brazil. Although it is not specifically aimed at that market, the clear beneficiary of this program is China, which accounts for 80% of these vehicles.
A potential trade agreement with the United States would also enable a still-unconfirmed quota of 10,000 units, under which vehicles could be imported from the U.S. market while also avoiding the same additional 35% tariff.
Thus, with the exception of South Korea and Japan, virtually all of the world’s major automobile-producing countries would have the opportunity to sell new vehicles to Argentina without the current tariff barrier. Even though those two countries have production plants in Europe and the United States, meaning that this limitation could be overcome by importing vehicles from those locations rather than from the brands’ original countries.
A larger and better supply of imported vehicles
These agreements benefit consumers, who would gain access to a broader range of vehicles and technologies of higher quality at lower prices than currently available—at least in low- and mid-priced mass-market models—since the quality standards of higher-end cars and pickup trucks are equivalent to those of other plants worldwide.
However, this benefit could become a drawback for regional production if export competitiveness conditions are not improved, as these remain decisive for the profitability of Argentina’s industrial operations.
In this regard, the latest industrial report released this week by the Argentine Association of Automotive Manufacturers (Adefa) showed that in 2025 Argentina’s industrial vehicle production fell by 3.1%, while exports declined even more sharply, dropping 10.8% compared to 2024.
“Lowering tariffs is always good news, but just as the door is opened for imports, the door for exports must also be opened,” an Argentine automaker recently remarked.
The need to export more domestically produced vehicles
“An agreement like the trade agreement between Mercosur and the European Union will bring benefits to other sectors of the Argentine economy, but not so much to the automotive industry if conditions for exporting are not improved. Today, maintaining export markets is already difficult. If competitiveness is not improved, we will remain expensive, even if we sell without tariffs,” they said.
Importing cars from Europe makes complete sense, but exporting products manufactured in Argentina to EU countries does not seem as easy. Nevertheless, the trade agreement between Mercosur and the European Union could hypothetically allow Argentina’s main automotive product—mid-size pickup trucks—to gain export opportunities, competing with Thailand and South Africa, which are currently major suppliers to the European Union.
There could also be specific cases involving brands that had already decided to shift their production toward electrified vehicles ahead of the 2035 deadline that was set to ban internal combustion engine cars. Although that deadline has now been postponed without a new date in sight, there may be situations in which it is more convenient to source such vehicles from South America while continuing a slower transition toward manufacturing electrified vehicles at European plants.
The same sources who warned about the difficulty of continuing to export without improving competitiveness said they prefer “an agreement of this nature rather than a tariff cut, which could be temporary and short-lived.” The trade agreement between Mercosur and the European Union, in addition to being long-term and progressively implemented, includes safeguards to protect local industry in the event of harm caused by a massive influx of imports, not only automobiles.