First, the FTA between MERCOSUR and EFTA represents an institutional turning point of strategic significance for Latin America itself. Concluding an agreement with EFTA – a group of high-income economies with very stringent standards on governance, environment, labour and technology – shows that MERCOSUR is ready to “move up a tier” from traditional FTAs to a new generation of high-standard FTAs. For MERCOSUR, this FTA opens the door to a stable, wealthy European market for its agricultural products, processed foods and industrial goods, while at the same time requiring the bloc to incorporate and implement commitments on sustainable development, forest management, anti-deforestation, carbon emission reduction and the protection of workers’ rights. In other words, it is both a tool for market expansion and a “lever for internal reform” within the bloc.

For Viet Nam, the MERCOSUR–EFTA FTA has a dual significance. At the first level, it creates political and technical momentum for MERCOSUR to accelerate negotiations with other partners outside the region, including Viet Nam. Having already “warmed up” with EFTA and completed the legal and technical framework for a high-standard FTA, the bloc is in a much better position to enter into PTA/FTA negotiations with Viet Nam in late 2025 and early 2026. This is an important “window of time” for Viet Nam to push forward a Viet Nam–MERCOSUR PTA framework, securing early tariff preferences for its key export groups such as textiles and garments, footwear, machinery and electronics, thereby deepening its penetration into a market of nearly 300 million people with a combined GDP of around 3 trillion USD.

At the second level, the MERCOSUR–EFTA FTA sets a “new minimum standard” for the bloc’s trade relations with the rest of the world. The ESG-related commitments on anti-deforestation, wood-traceability governance, carbon reduction and labour standards that MERCOSUR has accepted vis-à-vis EFTA are very likely to become the template for subsequent FTAs, including any future PTA/FTA with Viet Nam. This means that if Viet Nam wishes to exploit the MERCOSUR market effectively, its exports – particularly agricultural products, wood and wooden furniture, and processed foods – will have to meet a level of supply chain transparency and sustainability certification (such as FSC for timber, or sustainable agriculture certifications for coffee and pepper) comparable to that of competing suppliers from South America.

While MERCOSUR is deepening its integration with EFTA, bilateral trade between Viet Nam and MERCOSUR in the third quarter of 2025 continues to show an expansion in scale, but also reveals more clearly certain vulnerabilities. Total two-way trade in Q3 reached nearly 9.5 billion USD, up 7.1% compared with the same period in 2024. Of this, Viet Nam’s exports were about 2.9 billion USD (up 20%), while imports exceeded 6.5 billion USD (up 2.2%), leaving Viet Nam with a trade deficit of roughly 3.6 billion USD in just three months.

By individual partner, Argentina and Brazil remain the two pillars of Viet Nam’s trade relations within MERCOSUR. With Argentina, total trade in Q3 2025 reached 3.5 billion USD, an increase of 25.6%. Viet Nam’s exports to Argentina surged by 129.3% to 772 million USD, dominated by phones and components, footwear, computers and electronic products, machinery and textiles. In contrast, imports from Argentina reached 2.7 billion USD, mainly livestock feed, feed ingredients and maize, clearly reflecting a pattern of “exporting industrial and electronic goods, importing unprocessed and semi-processed agricultural commodities”.

In the case of Brazil, total trade in Q3 reached 5.7 billion USD, down slightly by 1.3%, but the structure remains highly complementary: Viet Nam exports about 2 billion USD, mainly phones, components, electronics, transport equipment, footwear and seafood, while importing around 3.7 billion USD in agricultural and raw materials such as cotton, ores and minerals, soybeans, maize, animal feed and wheat. This shows that Viet Nam is increasingly linked to Brazil and Argentina as “raw material hubs” providing inputs for its domestic livestock, food processing and parts of its light industry.

Smaller partners such as Paraguay, Uruguay and Venezuela account for a modest share of total trade but exhibit high volatility. Paraguay saw its total trade with Viet Nam fall by 48.1%, mainly because Viet Nam’s imports from Paraguay plunged by more than 85%, even as Viet Nam’s exports to the country grew by over 30%. Uruguay moved in the opposite direction: total trade rose by 88.5%, with Viet Nam’s imports from the country nearly tripling. Venezuela, though starting from a low base, recorded total trade growth of almost 70%, with Viet Nam’s exports to the country increasing by nearly 50%. These figures paint a picture of a trade structure expanding in breadth, but still heavily concentrated on imported agricultural commodities and raw materials, and exported industrial and consumer goods.

With such a structure, MERCOSUR is simultaneously a strategic input market for Viet Nam’s food and raw-material security and a “direct competitor” in global markets for agricultural, forestry and processed food products. Once the MERCOSUR–EFTA FTA comes into force, the competitiveness of Brazilian and Argentinian agricultural exports in the European market will be further enhanced through tariff preferences and improved access to technology, capital and modern governance standards. This will exert additional pressure on Vietnamese agricultural exports – such as coffee, pepper, rice and seafood – not only in the EU but also in third markets where Viet Nam and South American suppliers compete directly.

Against that backdrop, Viet Nam’s wood sector is a typical example of a situation that is “both favourable and challenging”. In the first nine months of 2025, total exports of wood and wood products reached 12.49 billion USD, up 6.8% year-on-year, indicating that the sector has maintained positive growth momentum despite ongoing global economic uncertainty. The current export market structure is highly concentrated: the United States accounts for 6.97 billion USD, or 55.8% of total export value; followed by Japan (1.57 billion USD), China (1.41 billion USD), the Republic of Korea (538 million USD), and other markets such as Canada, the United Kingdom, Malaysia and India.

However, this heavy dependence on the US market is emerging as a systemic risk as the country implements new import tariffs under Section 232 of the Trade Expansion Act of 1974, with the possibility of imposing rates of up to 50% on certain wood product lines, particularly kitchen cabinets, bathroom cabinets and upholstered furniture. Should this scenario materialise on a broad scale, Viet Nam will face serious risks of losing market share, experiencing order cancellations or cutbacks, and seeing investment flows into the wood sector stagnate or shift elsewhere.

In this context, maintaining the growth momentum of the wood industry cannot rely solely on exports to a few traditional markets; it must be closely tied to a “three-pillar” strategy: diversifying export markets, upgrading sustainability standards and treating the domestic market as a strategic anchor. In terms of diversification, the strong export growth to Japan, Canada, the UK, Malaysia and Australia indicates that gradually shifting orders to markets that demand mid- to high-end segments and impose stringent environmental and traceability standards is proving effective. These markets, together with the potential of MERCOSUR if a PTA/FTA is advanced, can serve as “relief valves” when the US tightens its trade stance.

On sustainability standards, the MERCOSUR–EFTA FTA, with its strong commitments on anti-deforestation and sustainable forest management, is a clear indication of a broader trend: any supplier wishing to participate deeply in global wood value chains will be required to comply with these new benchmarks. If Viet Nam does not accelerate the standardisation of its domestic raw-material base, expand the area of plantation forests certified under FSC, digitise plantation data and strengthen traceability, then even with a PTA/FTA with MERCOSUR or other partners, its ability to participate deeply in global wood supply chains will remain limited.

The third pillar – the domestic market – should be viewed as a “co-equal pillar” alongside exports, rather than merely a “secondary market”. With a population of over 100 million, a rapidly growing middle class and increasing demand for better housing quality, furniture and living spaces, the domestic market is fully capable of serving as a foundation for Viet Nam’s wood industry to test new designs, diversify product lines, develop brands and position itself in the mid- to high-end segments. From this “strategic laboratory”, enterprises can refine products, business models and distribution systems – both traditional and e-commerce – before scaling up to international markets.

Taken as a whole, developments within MERCOSUR, the bloc’s FTA with EFTA, the trade structure between Viet Nam and MERCOSUR and the case of the wood sector all show that Viet Nam is entering a phase of deep strategic restructuring in its trade policy. If Viet Nam can seize the “golden opportunity” to advance a Viet Nam–MERCOSUR PTA, while proactively upgrading production standards, diversifying markets and developing the domestic market, it will be able to both mitigate the risks from policy shocks in a few major markets and enhance its capacity to participate in new global value chains that are forming around high-standard FTAs. Conversely, if growth continues to rely heavily on a small number of markets and product groups, without adequate investment in sustainability standards and adaptive capacity, the economy will become more vulnerable to successive and increasingly unpredictable waves of trade policy adjustment in the years ahead.

Việt Thành