Historic EU-Mercosur Trade Deal Signed, Aims to Forge New Transatlantic Partnership

BERLIN, 21 January 2026 – The European Union and the South American trade bloc Mercosur have formally signed a landmark Partnership Agreement, culminating over 25 years of fraught negotiations and setting the stage for one of the world’s largest free trade areas. The deal, inked on 17 January in Asunción, Paraguay, promises to reshape economic ties between the two continents but faces a final hurdle of parliamentary ratification amid persistent political divisions.

A Quarter-Century in the Making

The path to the EU-Mercosur Partnership Agreement (EMPA) has been long and winding. Negotiations began in 1999, with a political agreement finally reached in December 2024. The European Commission tabled the final legal texts for approval in September 2025, leading to a crucial Council vote on 9 January 2026. The signing ceremony four days ago marks a historic diplomatic milestone, creating a combined market of over 700 million people. The agreement will progressively eliminate tariffs on over 90% of goods traded between the blocs, covering everything from European machinery and cars to South American agricultural products.

Contentious Approval Exposes EU Rifts

The Council’s decision to authorise the signature passed by a qualified majority of 21 member states in favour, but it laid bare deep fissures within the EU. France, Austria, Hungary, Ireland, and Poland voted against the pact, while Belgium abstained. The opposition, led prominently by Paris, centred on fears that an influx of cheaper Mercosur beef, poultry, and ethanol would undercut European farmers who face stricter environmental and sanitary standards. In a bid to secure support, the European Commission offered concessions, including early access to €45 billion in Common Agricultural Policy funds from 2028 and reinforced safeguard clauses to protect sensitive sectors from import surges.

Germany, a long-time proponent of the deal, viewed its successful conclusion as a significant strategic victory. Chancellor Olaf Scholz had previously emphasised the agreement’s “major geostrategic role.” The final push for approval is widely seen as a response to a more volatile global trade environment, marked by protectionist US policies under President Donald Trump and a desire to diversify economic partnerships away from over-reliance on China.

Economic and Geopolitical Stakes

The economic relationship is already substantial. The EU is Mercosur’s second-largest trading partner in goods, with bilateral trade totalling over €110 billion in 2024. The EU is also the largest foreign investor in the region, with a stock of €390 billion. The deal aims to unlock further growth, with the Commission estimating it could boost EU exports to Mercosur by up to 39% annually.

Beyond tariffs, the agreement includes chapters on sustainable development, intellectual property rights, and small and medium-sized enterprises. It commits both sides to upholding labour rights and environmental standards, including fighting deforestation—a key concern for European critics. Geopolitically, the pact is framed in Brussels as a cornerstone of the EU’s strategy to strengthen ties with Latin America and assert its role as a champion of rules-based trade in an increasingly fragmented world.

Key Facts: The EU-Mercosur Partnership Agreement

Frequently Asked Questions

Is the EU-Mercosur deal finished now?

No. While the signing is a major political step, the agreement is not yet in force. It must now be ratified by the European Parliament and by the individual national parliaments of the Mercosur countries. This process could take several years and faces significant opposition, particularly in the European Parliament where left-wing, green, and far-right groups have expressed strong reservations.

Will European farmers be protected?

The final agreement includes a reinforced safeguard mechanism designed to allow the EU to temporarily suspend tariff preferences if imports of sensitive products like beef or poultry surge and cause serious harm to EU producers. Furthermore, the Commission has pledged additional financial support for farmers and stricter controls on imported food standards. Critics, however, argue these measures are insufficient and difficult to trigger in practice.

What does Germany gain from this deal?

As Europe’s largest exporter, Germany stands to benefit significantly from improved market access. High Mercosur tariffs on industrial goods—up to 35% on cars and machinery—will be eliminated, creating new opportunities for German automotive, chemical, and engineering firms. Politically, the deal aligns with Berlin’s goal of diversifying trade relations and strengthening economic diplomacy with strategic partners in Latin America.