Free trade agreements are strategic partnerships between countries that trade with each other by reducing barriers to entry to the international market for producers, standardizing labor practices, and ensuring affordability and safety for consumers, and more.
Compared to a trade war, free trade agreements are like peace treaties — they’re meant to bring countries into alignment and promote a fair and harmonious relationship that promotes trade and is mutually beneficial for all countries involved.
What do free trade agreements do?
Free trade agreements aim to keep international markets open and flexible for consumers and domestic industries by:
- Reducing trade barriers like tariffs. This lowers the cost of imports, keeping prices lower and giving consumers more purchase options
- Protecting intellectual property rights of domestic producers. Limiting competitive opportunities on proprietary products preserves access to international markets for domestic industries.
- Developing product and labor practice standards across markets. This protects consumers by ensuring that imported products are safe and meet the same kinds of standards as their domestic alternatives
- Protecting against exclusionary rules around investing or participating in financial markets
Subscribe to get unbiased, data-driven insights sent to your inbox weekly.
How do trade agreements impact US trade policy?
Since World War II, the US has generally promoted a global rules-based trading system focused on developing trade agreements that keep global tariff rates low. The US entered into a global agreement called the General Agreement on Tariffs and Trade in 1947. In 1995, the agreement was integrated into the standards of the newly-formed World Trade Organization (WTO), which today includes the US among its 164 members.
The WTO regulates tariff rates across member countries with a “most favored nation” rule requiring that specific import tariffs set by one member on another must apply to all other members at the same rate.
The WTO allows member nations to negotiate their own free trade agreements, so the US also maintains free trade partnerships with individual countries and regions.
In a reversal from historical policy of low tariffs, the Trump administration implemented a new trade policy and announced a series tariff increases in 2025, with higher rates assigned to countries with whom the US has larger trade deficits (i.e., countries from whom the US imports more than it exports).
How many free trade agreements does the US have?
As of 2025, the US has 14 active trade agreements covering 20 countries. About 40% of exported American goods flow to these countries.
The countries that the US has bilateral (or two-sided) agreements with are:
- Australia
- Bahrain
- Chile
- Colombia
- Israel
- Jordan
- Korea
- Morocco
- Oman
- Panama
- Peru
- Singapore
It’s also party to two regional agreements: the USMCA (with Canada and Mexico, formerly known as NAFTA) and CAFTA-DR (with Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua).
Each agreement is governed by a council of labor and trade representatives from its member nations.
Learn more about the value of US trade, the US' top trade partners, and get the data directly in your inbox by signing up for our newsletter.
