Localization & New Trade Partnerships

Localization measures and strategic trade partnerships are becoming more prominent tools as governments seek to strengthen supply chain resilience and navigate shifting trade dynamics.

The EU proposed “Made in Europe” requirements for clean industries. Under the Industrial Accelerator Act, proposed “Union-origin” requirements could apply to around 40% of clean energy auctions, alongside EV procurement schemes (BloombergNEF). The measures aim to strengthen European industrial competitiveness while introducing new sourcing considerations for companies supplying the EU market. The proposal remains under negotiation, with EV provisions expected to advance earlier than energy auction requirements (BloombergNEF).

Policy support is increasing, but market certainty remains a challenge for clean industrial investment. Despite an estimated €100bn pipeline of deep decarbonization projects and modest cost premiums (around 1-2%), investment remains constrained by uncertainty around future demand and market conditions.

Alongside localization measures, the EU is also advancing strategic trade partnerships to diversify supply chains and strengthen access to critical resources. The interim EU-Mercosur Trade Agreement, signed on 1 May 2026 between the EU and Brazil, Argentina, Uruguay and Paraguay, eliminates tariffs on 91% of EU exports and improves access to strategic materials, including lithium and nickel. The agreement also lowers tariffs across automotive, machinery, chemicals, agriculture, and critical minerals, while strengthening regulatory alignment and sustainability cooperation across participating markets.

Regional Insights

The EU-Mercosur Trade Agreement took effect on 1 May 2026 on a provisional basis. It expands preferential trade access between Europe and South America, progressively reducing tariffs across a wide range of goods and improving market access between the two regions.

Beyond tariff reductions, the agreement provides a framework for deeper cooperation on sustainability, incorporating sustainability clauses and safeguard mechanisms, including binding climate and labor obligations (with the Paris Climate Agreement enforceable as a condition of the Mercosur deal). For Mercosur countries, stronger links with European markets could support investment opportunities in sectors linked to the clean transition.

The agreement supports efforts the EU's efforts to diversify trade partners and improve strategic autonomy over critical mineral supply chains. Mercosur countries hold significant reserves of critical minerals, and as demand for minerals used in clean technologies increases, partnerships with resource-rich economies are becoming increasingly important for improving supply chain resilience.

Proposed EU-origin requirements could introduce new sourcing conditions for suppliers seeking to serve European clean technology markets. However, as many of these measures are still being developed, it remains too early to assess their impactal on trade flows or production patterns.

The impact of proposed “Made in Europe” requirements is expected to vary depending on sector-specific supply chain structures and existing manufacturing capacity within Europe (BloombergNEF).

Wind is expected to be relatively well positioned due to established EU manufacturing bases and more integrated supply chains (BloombergNEF).

Solar PV is more exposed due to its heavier reliance on globally distributed and Asia-linked supply chains, particularly for solar cells and upstream components. Under the proposal, PV cells and inverters used in supported projects would need to meet EU-origin requirements three years after entry into force (BloombergNEF).

Significant cost gaps between EU-produced and imported modules (see Figure 2), alongside potential flexibility mechanisms (including potential waivers where costs exceed a 20% threshold), create uncertainty around final eligibility and geographic scope (BloombergNEF).