EU Signs Trade Deal With South American Bloc

European Commission president says agreement demonstrates nations are choosing 'fair trade over tariffs'
Posted Jan 17, 2026 1:46 PM CST
EU, Mercosur Bloc Sign Major Free Trade Deal
Farmers park their tractors near the French Assembly as they protest the Mercosur EU trade deal with South America that they fear threatens their livelihoods on Tuesday in Paris.   (AP Photo/Christophe Ena)

European Union leaders and South America's Mercosur bloc on Saturday signed a sweeping free trade pact in Paraguay, concluding a negotiation process that began a quarter-century ago. The agreement aims to cut tariffs and expand commerce between the EU and Mercosur members Argentina, Brazil, Paraguay, and Uruguay, Reuters reports. But it requires approval from the European Parliament and ratification by each Mercosur legislature before it can take effect. Although the deal was long in the works, President Trump's upending of long-standing alliances and global trade brought urgency to the effort, per the Washington Post.

European Commission President Ursula von der Leyen and European Council President Antonio Costa attended the ceremony in Asuncion alongside Mercosur leaders. The deal moved forward after securing backing from most EU governments last week, per Reuters, despite resistance from farmer organizations and environmental advocates who warn of increased competition from cheaper South American products and potential pressure on forests. Von der Leyen said the accord has created the world's largest free trade zone and shows that the blocs are opting for "fair trade over tariffs" and "a productive, long-term partnership over isolation."

Trade between the two regions, covering a combined market of about 700 million people, totaled nearly $128 billion in 2024. EU exports are dominated by machinery, chemicals, and transport equipment, while Mercosur mainly ships farm goods, minerals, wood pulp, and paper. "Twenty-six years ago, this was an agreement about leadership, about setting rules for trade in the world," a foreign policy analyst told Deutsche Welle. But with the EU's share in the global economy falling, Andres Malamud said, "It's about resilience." Von der Leyen said, "The geopolitical importance of this agreement cannot be overstated," per the AP.

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