Global trade faces mounting uncertainty, driven by rapid shifts in the international landscape. In response, the United States and the European Union have charted starkly different courses. The US is erecting new barriers to trade, with average weighted tariff rates surging from 2.0% in 2024 to 15.4% as of late 2025. The EU, by contrast, has doubled down on economic openness rather than retreating behind tariff walls. Through an ambitious programme of landmark free trade agreements and innovative digital trade frameworks, the EU has recently concluded its most significant trade deals in a generation.
A tale of two approaches
The realignment of global trade flows is already underway. Some trade corridors are deepening, others contracting, and analysts predict that as much as one-third of global trade could shift to new routes over the next decade. In this volatile environment, multinationals are reassessing everything from growth strategies to supply chains, seeking stability and opportunity wherever they can find it.
The EU's response has been to pursue rules-based trade partnerships that provide precisely that stability. Two agreements concluded in January 2026 exemplify this approach: the EU-India Free Trade Agreement and the EU-Mercosur Partnership Agreement.
EU-India FTA: a historic opening
The EU-India agreement, reached in January 2026 after negotiations that began in 2007, paused in 2013, and relaunched in 2022, is the largest trade deal ever concluded by either party. It must still be adopted by the Council and European Parliament, with entry into force foreseen for early 2027.
The tariff reductions are unprecedented. India will cut duties on cars, while tariffs on car parts will be fully abolished within five to ten years. Duties on chemicals (up to 22%), machinery (up to 44%), and pharmaceuticals (up to 11%) will be mostly eliminated, allowing European manufacturers to compete on a level playing field in one of the world's fastest-growing markets.
The agreement also delivers the most ambitious services commitments India has ever made, covering financial services and maritime transport among other sectors, and establishes strong intellectual property protections to facilitate cross-border investment and collaboration.
EU-Mercosur: building a transatlantic bridge
The EU-Mercosur Partnership Agreement establishes a rules-based marketplace between the European Union, Argentina, Brazil, Paraguay, and Uruguay. The interim Trade Agreement ("iTA"), signed in January 2026, eliminates tariffs on 91% of products, including duties of up to 35% on car parts, 20% on machinery, 18% on chemicals, and 14% on pharmaceuticals.
Despite the European Parliament's request that the Court of Justice of the European Union first opine on the agreement's compatibility with EU law, the European Commission has announced it will proceed with provisional application of the iTA from 1 May 2026. Tariff cuts on goods will begin at that time for Mercosur members that have completed and notified their ratification by the end of March.
The economic opportunity is substantial. The EU is already Mercosur's second-largest trading partner and its biggest foreign investor, and the Commission estimates that removing Mercosur's high tariffs will save European businesses more than €4 billion annually in customs duties alone.
EU - Australia: anchor of a values-driven Indo-Pacific pivot
As a flagship of its values-driven, security-conscious trade agenda, the EU’s newly concluded EU - Australia trade agreement will remove over 99% of tariffs on EU exports, deepen ties with the Indo-Pacific, and lock in modern rules for services and data to support resilient supply chains. It matches opportunity with safeguards by opening Australia’s market for EU industrial goods and agri-food specialities, protecting EU geographical indications, and preserving the Union’s stringent health and safety rules, while embedding binding commitments on climate, labour, and environmental protection. Strategically, it secures enhanced cooperation and improved access to Australian critical raw materials such as aluminium, lithium, and manganese, with the pact - concluded in March 2026 - now proceeding through both sides’ ratification steps before entering into force.
Rules of origin: the key to unlocking FTA benefits
While the tariff reductions and market access opportunities under these agreements are substantial, businesses must first satisfy rules of origin to benefit from preferential duty rates. These rules determine whether a product qualifies as originating from an FTA partner country, and only compliant products are eligible for reduced or eliminated tariffs.
Demonstrating originating status can be complex. Rules of origin typically require that a product has been sufficiently processed or manufactured within the FTA partner countries, with specific thresholds for local content or the degree of transformation that inputs must undergo. For businesses with global supply chains sourcing from multiple countries, determining and documenting compliance is a significant operational challenge. Companies must maintain detailed supply chain records, gather origin declarations from suppliers, and prepare documentation for customs authorities. Non-compliance not only forfeits the tariff benefit but can also result in penalties and retrospective duty claims.
For multinationals reviewing supply chains in response to shifting trade patterns, rules of origin must therefore be integrated into supply chain design from the outset. A product assembled within the FTA region but manufactured using externally sourced components may not qualify for preferential treatment. Getting this right requires careful upfront analysis and ongoing monitoring as sourcing arrangements evolve.
How can PwC support you?
At PwC Switzerland, our customs and international trade specialists combine legal, technical, and operational expertise to help your business navigate the complexities of global trade. As regulations continue to evolve, we provide end-to-end support across all aspects of customs compliance and strategy:
- Preferential origin management: We assist in managing preferential origin to benefit from reduced duty rates under various trade agreements and identify opportunities to reduce overall import costs.
- Supply chain and operations: Our supply chain and operations consulting experts help you map your physical and financial flows, understand your current tariff exposure, and identify mitigation options. Working closely with our customs specialists, we connect customs strategies with transfer pricing, regulatory requirements, and broader portfolio risk. We also support manufacturing network planning - from raw materials sourcing to localisation strategies - helping you meet the requirements of customs authorities and policymakers while safeguarding access to critical markets.
- Tailored compliance solutions: We work with you to assess your current customs and international trade processes and identify any gaps or risks. Our team assists in implementing the necessary measures to ensure your business remains compliant with all relevant regulations
- Unlocking opportunities: Beyond compliance, we help you identify and capitalise on opportunities that new customs regulations may offer. This could include optimising your supply chain, reducing costs, or streamlining your customs procedures.