Agreement Signed After Decades of Negotiations
The European Union and Mercosur formally signed a long-negotiated free trade agreement in Asuncion, Paraguay, on Jan. 17, 2026, closing a process that stretched more than 25 years. The deal is designed to deepen commercial links at a time of widening trade frictions and a broader shift toward protectionist policies in multiple regions.
Mercosur comprises Argentina, Brazil, Paraguay, and Uruguay. Bolivia, although a newer member of the bloc, is not included in the current agreement but could potentially join later, while Venezuela remains suspended and outside the pact. The agreement still requires approval in Europe, because it must be ratified by the European Parliament before it can take effect. In South America, support is described as broad, making ratification there more likely.
Tariffs To Fall Across Most Goods Traded
Under the accord, the two blocs would phase out more than 90% of tariffs over time, covering goods ranging from Argentine beef to German cars. Supporters argue that, by lowering barriers across a very large consumer base, more than 700 million people, the agreement could reduce prices and widen market access for companies on both sides of the Atlantic.
The agreement also reflects a balance of interests: South American cattle-producing economies see export opportunity, while European industrial sectors view the region as an important growth market. Even so, the final text and the timeline for tariff reductions have been shaped by political sensitivities, especially in Europe, around agricultural competition and regulatory standards.
Leaders Frame Pact As Counterweight To Protectionism
At the signing ceremony, European Commission President Ursula von der Leyen presented the agreement as a strategic choice against rising tariff disputes. She said: “We choose fair trade over tariffs.” Her comments came as U.S. President Donald Trump was cited in connection with newly announced 10% tariffs on eight European nations tied to a separate dispute involving Greenland.
From the South American side, Brazilian President Luiz Inácio Lula da Silva praised the pact as an affirmation of cooperation, writing on X that “two regions… choose a different path” amid protectionism and slowing global growth. But Lula did not attend the ceremony, a move interpreted as a signal of lingering tension after the EU delayed an earlier signing timeline while pressing for additional protections for European farmers.
Ratification Fight Looms as Farmers Mobilize
European agricultural concerns remain a central obstacle. The agreement includes environmental-related provisions, quotas on certain imports such as beef and sugar, and staged tariff cuts. The EU also sought to reassure farmers through the promise of subsidies, an approach described as part of the effort to build political support among member states, including Italy, which was cited as moving into the supportive camp earlier in the month.
Despite those steps, opposition remains influential. France is identified as standing against the agreement, with President Emmanuel Macron concerned that farmer anger could strengthen the country’s far right ahead of the 2027 presidential election. Meanwhile, the signing also highlighted political shifts within Mercosur itself: Argentine President Javier Milei, who previously derided the bloc as a “prison” and skipped its 2024 summit, endorsed the deal in Asuncion, saying: “closure and protectionism… are the greatest causes of economic stagnation.”
