ASUNCION, Paraguay (AP) — The European Union and the Mercosur bloc of South American countries formally signed a long-sought free trade agreement on Saturday, capping more than a quarter-century of torturous negotiations to strengthen commercial ties in the face of rising protectionism and trade tensions around the world.
The signing ceremony in Paraguay’s capital, Asunción, marks a major geopolitical victory for the EU in an age of American tariffs and surging 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 keeps diverse trade and diplomatic relations even as U.S. President Donald Trump makes an aggressive push for geopolitical dominance across the Western Hemisphere.
The agreement could still face pushback in the EU parliament, which must ratify it before it can take effect. Ratification is considered all but guaranteed in South America, where the agreement has broad support.
Mercosur consists of the region's two biggest economies, Argentina and Brazil, as well as Paraguay and Uruguay. Bolivia, the bloc's newest member, can join the trade deal in the coming years. Venezuela has been suspended from the bloc and isn't included in the agreement.
Promoted by South America’s renowned grass-fed cattle-raising countries and Europe’s industrial interests, the accord will gradually eliminate more than 90% of tariffs on goods ranging from Argentine beef to German cars, creating one of the world’s largest free trade zones and making shopping cheaper for more than 700 million consumers.
Geopolitical undertones
European Commission President Ursula von der Leyen, who heads the EU’s executive branch, portrayed the deal as a bulwark against the disruptive policies of the Trump administration.
“It reflects a clear and deliberate choice: We choose fair trade over tariffs. We choose a productive long-term partnership over isolation,” von der Leyen declared in an veiled rebuke of Trump at the ceremony, which got underway as Trump announced 10% tariffs on eight European nations over their opposition to American control of Greenland.
“We will join forces like never before, because we believe that this is the best way to make our people and our countries prosper.”
The White House did not immediately respond to a request for comment.
Brazilian President Luiz Inácio Lula da Silva, a long-time advocate for the EU-Mercocsur deal as negotiations lumbered through his three nonconsecutive terms, hailed the agreement as force for global cooperation.
“At a time when unilateralism isolates markets and protectionism inhibits global growth, two regions that share democratic values and a commitment to multilateralism choose a different path," Lula said in an X post.
But the decision by the deal's champion to skip the ceremony signaled simmering tensions between the trading blocs.
“It leaves a bitter taste,” Paraguayan President Santiago Peña said of Lula's absence Saturday as he praised the Brazilian president's advocacy at a press conference.
The final push
Brazil, which held the rotating presidency of Mercosur last year, was gearing up to host the signing ceremony last month when European countries called it off, demanding more concessions to farmers scared of a surge in cheap South American agricultural imports.
Robbed of his spotlight, Lula was outraged at what was widely seen in South America as the latest example of the EU's bureaucratic intrusiveness.
One of the main reasons the deal took so long to clinch was Brussels' attempts to manage South American agricultural production processes, from standards on deforestation regulation to plastic packaging, as European farmers complained they couldn't compete if their South American counterparts were held to lower standards for pesticide use and animal welfare.
“The EU’s maximalist wish lists of demands from developing economies willing to sign free trade agreements are often perceived as patronizing,” said Agathe Demarais, a senior policy fellow with the European Council on Foreign Relations.
Angry European farmers
After the accord incorporated environmental regulations, strict quotas on farm imports like beef and sugar and staggered timelines for tariff reductions, the EU sweetened the deal further for its farmers with a promise of hefty subsidies. That pushed agricultural powerhouse Italy across the line earlier this month.
But even as the ink dried on Saturday, powerful protectionist lobbies in Europe were still hoping to prevent the agreement from clearing its main final hurdle: ratification by the European Parliament.
France remains opposed to the accord, with President Emmanuel Macron worrying that farmers’ frustration with the EU could drive more voters to the country’s far right in the 2027 presidential election.
In an interview, EU trade commissioner Maroš Šefčovič said he'd start lobbying Monday to get European Parliament members on board with the deal in hopes of seeing it passed in the first half of this year.
“We'll have very intense communication with all the members on a group level, on an individual level,” Šefčovič told The Associated Press, expressing confidence that “everyone will do the procedures as quickly as possible so we can benefit from this historic achievement.”
He didn't name Trump but, remarking on Saturday's coincidence between the U.S. president's latest tariff threats and the trade deal's signing, Šefčovič said the EU-Mercosur accord sent the message “that if someone prefers and believes in high tariffs and power politics, Mercosur and European countries representing more than 700 million people clearly believe in ... international law, predictability, certainty and the removing of trade barriers.”
A revived Mercosur
The deal is a sign of the bloc's revived relevance after years in which it was embroiled in political spats, undermined by economic crises and constrained by protectionist governments.
Perhaps most striking is the enthusaism of Argentine President Javier Milei, a radical libertarian and admirer of Trump who shares the U.S. leader's contempt for global institutions like the United Nations. Milei came to office in late 2023 with nothing but scorn for Mercosur, trashing it as a “prison,” threatening to withdraw and skipping the 2024 summit.
But his enthusiasm for free trade overcame any skepticism of the bloc at Saturday's ceremony.
“Argentina understands firsthand that closure and protectionism, sheltered by rhetoric rather than results, are the greatest causes of economic stagnation,” he said before signing.
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Isabel DeBre reported from Buenos Aires, Argentina.
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