European Council President Antonio Costa, European Commission President Ursula von der Leyen, Paraguay’s President Santiago Pena and Argentina’s 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, on Jan. 17, 2026.
Cesar Olmedo | Reuters
Top officials from the EU and the South American bloc Mercosur signed a free trade agreement on Saturday in Paraguay, paving the way for the European Union’s largest-ever trade accord after 25 years of negotiations.
The agreement, designed to lower tariffs and boost trade between the two regions, must now gain the consent of 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.
European worries about cheap imports
The deal received the green light from most European nations last week, despite concerns from farmers and environmental groups, who fear a surge of inexpensive South American imports and increased deforestation.
Von der Leyen, who met with Lula before heading to Asuncion for the signing, said the deal would create the largest free trade zone in the world.
“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 the ceremony on Saturday morning, U.S. President Donald Trump vowed to impose increasing tariffs on eight European nations if the United States is not permitted to purchase Greenland.
“This agreement will help both our blocs navigate an increasingly turbulent political environment without abandoning our values, marking a true milestone in shoring up our economic security,” Costa said.
While Mercosur officials have expressed reservations about certain regulations within the pact, Lula affirmed on Friday in Rio de Janeiro that it will unlock greater opportunities and stimulate more trade and investment for both parties.
Brazil’s government said in a statement that the deal is “emblematic of Lula’s efforts to expand and diversify markets,” adding that South America’s largest economy is also negotiating agreements with the United Arab Emirates, Canada and Vietnam, besides the expansion of a tariff‑preference pact with India.
Trade between the EU and Mercosur, which encompasses a market of 700 million people, reached a value of 111 billion euros in 2024. European Union exports mainly consist of machinery, chemical products, and transport equipment, whereas Mercosur’s exports are concentrated in agricultural goods, minerals, wood pulp, and paper.