EU and Mercosur bloc of South American nations sign trade deal to end quarter-century of talks

The signing ceremony in Paraguay’s capital, Asuncion, represents a major geopolitical victory for the EU in an era of US tariffs and rising Chinese exports, expanding the bloc’s foothold in a resource-rich region increasingly contested by Washington and Beijing.

It also sends a message that South America maintains diverse trade and diplomatic relations even as US President Donald Trump makes an aggressive push to achieve geopolitical dominance across the Western Hemisphere.

Mercosur consists of the region’s two largest economies, Argentina and Brazil, as well as Paraguay and Uruguay. Bolivia, the bloc’s newest member, could join the trade agreement in the coming years. Venezuela has been suspended from the bloc and is not included in the agreement.

The phase-out of more than 90% of tariffs under the agreement, promoted by grass-fed South American nations and European industrial interests, creates one of the world’s largest free trade zones and makes shopping cheaper for more than 700 million consumers.

Geopolitical undertones

European Commission President Ursula von der Leyen, who heads the EU executive, portrayed the deal as a bulwark against the Trump administration’s disruptive policies.

“It reflects a clear and deliberate choice: We choose fair trade over tariffs,” von der Leyen declared in a veiled rebuke of Trump’s trade policies at the ceremony that began with Trump announcing 10% tariffs on eight European countries over their opposition to US control of Greenland: “We choose fair trade over tariffs. We choose long-term, fruitful partnership over isolation.”

“We will unite our efforts like never before, because we believe this is the best way to make our people and countries prosper.”

Brazilian President Luiz Inacio Lula da Silva, a long-time supporter of the EU-Mercosur deal, with negotiations faltering during his three non-consecutive presidential terms, praised the agreement as a symbol of global cooperation.

“At a time when unilateralism isolates markets and protectionism restricts global growth, two regions that share democratic values ​​and a commitment to multilateralism are choosing a different path,” Lula said in the X post.

Lula’s decision to skip the ceremony indicates escalating tensions between the trading blocs.

European farmers

Brazil, which assumed the rotating presidency of Mercosur last year, was preparing to host the signing ceremony in the country’s capital, Brasilia, last month, when European countries canceled it, demanding more concessions for farmers fearful of the potential dumping of cheap agricultural imports from South America.

Lula, deprived of the limelight, was angry at what was widely seen in South America as the latest example of bureaucratic interference by the European Union. One of the main reasons the deal has taken so long to conclude is Brussels’ attempts to manage agricultural production in South America, from plastic packaging standards to regulating deforestation.

“The EU’s extreme wish lists of developing economies wanting to sign free trade agreements are often seen as condescending,” said Agathe Demarais, a senior policy fellow at the European Council on Foreign Relations.

After imposing environmental and animal welfare regulations, imposing strict quotas on agricultural products such as beef and sugar, and staggering tariff reduction schedules, the EU sweetened the deal further for its farmers by promising huge subsidies. That pushed agricultural powerhouse Italy over the line earlier this month.

But even as the ink dried on Saturday, Europe’s powerful protectionist lobby was still hoping to prevent the agreement from passing its final hurdle: ratification by the European parliament.

France remains opposed to the deal, with President Emmanuel Macron concerned that farmers’ frustration with the EU could push more voters to the country’s far right in the 2027 presidential election.

“Everything will depend on the political appetite of the European Parliament,” said João Paulo Cavalcanti, a Brazilian lawyer specializing in international trade. “Clearly this could create an obstacle to approval.”