Chile negotiates U.S. trade deal to cut 12.5% tariff on wine and salmon

Chile is negotiating with the United States on a new trade arrangement that could lower or remove a 12.5% U.S. surcharge on products including wine, salmon, wood and some fruit, while leaving the broader free trade agreement between the two countries in place.

The talks center on what officials call an Agreement on Reciprocal Trade, or ART. Chile’s Undersecretariat of International Economic Relations has said the objective is to seek new exemptions or tariff reductions for products that were left outside the list of Chilean exports still entering the U.S. market without the added duty.

The negotiations come after Washington began applying the 12.5% tariff to Chile and about 40 other economies in July. Chilean officials have said 53% of the country’s exports remain exempt, but that major shipments such as wine were not included in that protected group. Before the recent U.S. trade measures, all bilateral trade between Chile and the United States had been at zero tariffs since 2015 under the free trade agreement that entered into force in 2004.

Paula Estévez, Chile’s undersecretary for international economic relations, said last week that the government is negotiating an ART with the United States, while also warning that the country should not expect every export to return to zero tariffs. She said U.S. trade policy has changed for domestic reasons, including reindustrialization, tax revenue and the stated goal of rebalancing bilateral trade. Chile runs a trade surplus with the United States, a factor Chilean officials now see as part of the negotiating backdrop.

An ART is a bilateral instrument that can set specific conditions for a trade relationship, including market access, tariffs, exemptions and other commitments. In Chile’s case, officials and people familiar with the matter say such a deal would not replace the existing free trade agreement. Instead, it would sit alongside it and address the new tariffs introduced under the current U.S. trade policy.

That distinction matters because the free trade agreement still governs much of the economic relationship. According to people with knowledge of the talks cited in Chile, the agreement remains the legal basis for the 53% of Chilean products that are still entering the U.S. duty-free. It also covers services, investment, customs procedures and the H-1B1 temporary work visa category that Chile shares only with Singapore.

The current dispute grew out of several stages in the Trump administration’s tariff policy. Chilean officials and analysts describe a first phase in April 2025, when President Donald Trump announced reciprocal tariffs on what he called “Liberation Day,” setting a general floor of 10% that included Chile and higher rates for some other economies. A second phase followed after the U.S. Supreme Court found that the International Emergency Economic Powers Act, or IEEPA, had been used beyond the president’s authority for the reciprocal tariffs. The administration then turned to Section 122 of the Trade Act of 1974 to impose a temporary 10% surcharge.

The third phase came through an investigation under Section 301 of the same law involving 60 economies and their mechanisms for banning imports made with forced labor. The resulting tariffs were set at either 10% or 12.5%. Chile fell into the 12.5% group, along with 40 other countries. People familiar with the Chile-U.S. discussions say the ART framework emerged in that third stage, as Washington shifted from unilateral tariffs to bilateral understandings with individual countries.

In practice, Chile is trying to secure better treatment for products now paying the 12.5% surcharge. One option under discussion is to add more Chilean goods to the list of items exempt from the measure. Another is to reduce the rate on certain products from 12.5% to 10%. However, Chilean officials and sources familiar with the issue have stressed that the negotiations may not necessarily end with a signed agreement.

The talks have raised questions inside Chile over whether an ART would weaken or effectively bury the existing free trade agreement. Some government officials have been sharply critical of the U.S. tariff move. Agriculture Minister Jaime Campos said earlier this year that Washington was acting arbitrarily and violating the spirit of the free trade pact. More recently, he said he hoped the tariff issue would be resolved quickly and on favorable terms for Chile, but acknowledged that the outcome does not depend on Chile alone.

Trade analysts in Chile say the legal and practical issues are different. Felipe Oyarzún, a market analyst at XTB, said an ART can coexist with an existing free trade agreement and pointed to Central American examples. El Salvador and Guatemala have signed similar arrangements despite already being covered by CAFTA-DR, the trade pact linking the United States with the Dominican Republic and Central America. Oyarzún said that means an ART would not formally end Chile’s treaty with Washington, which also has its own procedures for termination.

At the same time, he said, part of the value of the Chile-U.S. free trade agreement has already been weakened in practice because products that previously entered at zero tariffs are now facing new duties. He said the key question is not whether the treaty survives on paper, but how much of the previous preferential access Chile can recover and what commitments it may have to make in exchange.

Cristian Guzmán Cofré, an economist at the Catholic University of the Most Holy Conception, said Chile is negotiating from a weaker position than before because the tariff increase is already in force and because the broader U.S.-China trade conflict continues to shape the international environment. He said lower trade barriers remain important for Chilean exporters because products such as salmon, wood, fruit and wine compete in global markets and need the lowest possible import costs to remain competitive.

That is especially relevant for the beverage industry. Chilean wine producers have been among the sectors hit by the new U.S. surcharge, and the outcome of the talks could affect their competitiveness in one of their most important export markets. Any reduction in the tariff could help producers protect prices and margins and plan shipments with more certainty. If the duty remains in place, exporters may need to keep adjusting pricing and commercial strategies in the United States.

Industry groups in other sectors have made similar arguments. Salmon exporters, for example, have said they do not compete directly with U.S. domestic production and are seeking tariff-free access on that basis. The same logic has informed Chile’s push for exemptions on products where officials believe the added tariff makes less economic sense or imposes avoidable costs on trade.

The case is also exposing a larger strategic issue for Chile. Economists have argued that even if the government reaches a better outcome with Washington, the country still needs to diversify its export base and reduce dependence on a handful of large markets. But they also acknowledge that the United States remains too important to ignore, making tariff relief a near-term priority.

For now, the Chilean government’s position is that the free trade agreement remains intact and foundational, even as it negotiates a narrower arrangement to address the new tariff regime. The goal is not to rewrite the entire trade relationship, but to recover some of the lost competitiveness in sectors left exposed by Washington’s latest measures.