European Council President Antonio Costa, European Commission President Ursula von der Leyen, Paraguayan President Santiago Pena and Argentine President Javier Milei during the signing ceremony of a free trade agreement between the European Union and the South American bloc Mercosur, ending more than 25 years of negotiations, in Asuncion, Paraguay, January 17, 2026.
Cesar Olmedo | Reuters
Top officials from the EU and South America’s Mercosur bloc signed a free trade deal in Paraguay on Saturday, paving the way for the European Union’s biggest-ever trade deal after 25 years of negotiations.
The agreement, intended to reduce customs duties and boost trade between the two regions, must now win approval from the European Parliament and be ratified by the legislatures of Mercosur members Argentina, Brazil, Paraguay and Uruguay.
European Commission President Ursula von der Leyen and European Council President Antonio Costa joined the presidents of Mercosur countries at Saturday’s ceremony, with the exception of Brazilian President Luiz Inacio Lula da Silva, who sent his foreign minister.
Europeans worry about cheap imports
The deal received the green light from most European countries last week, despite concerns from farmers and environmental groups, who fear a surge in cheap South American imports and increased deforestation.
Von der Leyen, who met Lula before traveling to Asunción for the signing, said the deal would create the world’s largest free trade zone.
“This agreement sends a very strong message to the world. It reflects a clear and deliberate choice. We choose fair trade over tariffs. We choose a productive, long-term partnership over isolation,” she said on Saturday.
Just before Saturday morning’s ceremony, U.S. President Donald Trump pledged to impose escalating tariffs on eight European countries if the United States is not allowed to buy Greenland.
“This agreement will help our two blocs navigate an increasingly turbulent political environment without abandoning our values, marking a real step in strengthening our economic security,” Costa said.
While Mercosur officials have expressed reservations about some of the pact’s regulations, Lula said Friday in Rio de Janeiro that it would open up greater opportunities and boost more trade and investment for both sides.
The Brazilian government said in a statement that the agreement is “emblematic of Lula’s efforts to expand and diversify markets”, adding that South America’s largest economy is also negotiating deals with the United Arab Emirates, Canada and Vietnam, in addition to expanding a tariff preferences agreement with India.
Trade between the EU and Mercosur, which encompasses a market of 700 million people, reached a value of €111 billion in 2024. The European Union’s exports mainly consist of machinery, chemicals and transport equipment, while Mercosur’s exports focus on agricultural products, minerals, wood pulp and paper.
Source | domain www.cnbc.com
