UK prime minister Sir Keir Starmer has batted away more calls to consider an EU customs union and China has levied tariffs on EU dairy products – a sour start to trade relations in 2026.

The South American Mercosur trade bloc could be revving up for a successful 2026, with reports over the festive period suggesting several trade deals could be done.

Customs union pressure

Prime minister Sir Keir Starmer has been forced to rebut further calls for a UK-EU customs union, with high-profile figures from within and without government urging reconsideration on the matter.

Yesterday, the PM told BBC’s Laura Kuenssberg that he supports “even closer alignment” with the single market, if it’s in the national interest, but ruled out a return to the EU Customs Union, or the creation of a bespoke arrangement.

“We are better looking to the single market rather than the Customs Union for our further alignment.”

His comments come after health secretary Wes Streeting became the next senior cabinet minister, after justice minister David Lammy, to advocate for bigger steps towards European cooperation from the government.

In a pre-Christmas interview with the Observer, the health secretary, who’s already developed a reputation as an ambitious future leadership contender willing to flout party lines, said that closer European ties were the best way to grow the country’s struggling economy.

“The reason why leaving the EU hit us so hard as a country is because of the enormous economic benefits that came with being in the single market and the Customs Union. This is a country and a government that wants a closer trading relationship with Europe.”

Later that week, Trades Union Congress leader Paul Nowak went further, telling the BBC that the government should look to forge “the closest possible economic and political relationship with the European Union” in 2026, to address ongoing cost-of-living challenges.

“They should look at every option for our relationship with the European Union up to and including a customs union.”

In December, a private members’ bill requiring the government to begin negotiations on a new EU customs union was backed by 100 MPs last year, including 13 Labour ministers.

Currently, the government approach to greater EU-UK cooperation in trade and customs centres on closer alignment of sanitary and phytosanitary rules, to ease the administration of moving plant and animal products, along with greater alignment on energy trade systems.

China-EU trade tensions

While it was noted that China ended 2025 on a trade high, despite the challenges presented by US tariffs, relations with one vital trading partner are looking less rosy.

China imposed tariffs of up to 42.7% on EU dairy products last month (22 December) after an anti-subsidy investigation into the bloc’s dairy sector.

China’s ministry of commerce said that it had found evidence of EU dairy products being subsidised, hurting its domestic producers.

The European Commission claimed the measures were “unjustified and unwarranted”, with a spokesperson Olof Gill describing the investigation as “based on questionable allegations and insufficient evidence”.

The investigation was opened in August 2024, shortly after the introduction of EU tariffs on Chinese electric vehicles, and is widely seen as a retaliatory measure.

The EU could be looking to introduce further trade measures this year, after political leaders pointed to the bloc’s trade imbalance with China as unsustainable. French president Emmanuel Macron described the trade surplus as “unbearable" last month, while European Commission president Ursula von der Leyen said trade relations with the Asian nation had reached an “inflection point”.

This followed Beijing’s disclosure that its trade surplus with the bloc reached US$300bn in 2025.

Mercosur manoeuvres

While certainly not the biggest news to come out of South America over the festive break, the continent’s trade bloc has endeavoured to close one long-negotiated trade deal, and reports suggest another could be on the way.

The signing of the EU-Mercosur trade deal, negotiated over 25 years, was delayed by the EU in December.

Both Italy and France said they needed more time to persuade their farmers to accept the deal, with Italian prime minister Georgia Meloni calling Brazilian president Luiz Inácio Lula da Silva to ask for more time.

Initially sceptical, claiming the deal would not be signed during his presidency if it failed to cross the line by year’s end, Silva relented and said he understood the delay was necessary to spare Meloni’s political blushes:

“Meloni explained that she is not against the agreement, she is simply experiencing some political embarrassment because of the Italian farmers, but that she is certain she is capable of convincing them to accept the agreement.”

French farmers have also maintained strong opposition to the agreement. Yesterday, the French agriculture minister Annie Genevard said more stringent checks on food imports would be introduced and goods found to contain banned substance would be rejected.

Canada deal for 2026?

Amid EU setbacks, Mercosur and Canada are seeking to advance trade talks, with hopes high for a deal to be done by the end of 2026.

Initially begun during the first Trump administration in 2018, negotiations stalled due to the Covid-19 pandemic. This year’s raft of US tariffs was the fresh impetus for talks.

Canada’s international trade minister Maninder Sidhu described the Canadian administration as “all hands on deck with trade diversification” when speaking to Politico last week (29 December).

While trade diversification is “nothing new”, he said that amid tariff chaos there were new opportunities, as countries show “willingness to look at Canada as a reliable, stable trading partner”.

Canadian officials visited Brazil in August to renew efforts, with Canada currently running a consultation with industry on a Mercosur deal which is set to conclude this month.

Despite progress, some experts have expressed doubts about the deal’s likelihood of completion, noting that both nations export similar products.

Toronto-based trade lawyer Barry Appleton told the FT that Canada had been “very slow” to explore South American market opportunities and raised concerns that “Mercosur and Canada compete to trade many of the same primary products in the global markets”.