EU, South American countries to ‘join forces like never before’ in new trade deal

Meeting to sign a free trade deal between the European Union and Mercosur in Asuncion, Paraguay, Saturday, Jan. 17, 2026.

ASUNCIÓN, Paraguay — The European Union and the Mercosur bloc of South American countries formally signed a long-sought free trade agreement on Saturday, strengthening commercial ties in the face of rising protectionism and trade tensions around the world.

The signing ceremony in Paraguay’s capital, Asuncion, caps more than a quarter-century of torturous negotiations. It 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 is keeping a range of trade and diplomatic relationships even as U.S. President Donald Trump makes an aggressive push for geopolitical dominance of the Western Hemisphere.

The agreement could still face hurdles 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, is not included the trade deal but could join in the coming years. Venezuela has been suspended from the bloc and isn’t included in the agreement.

Supported by South America’s cattle-raising countries and European 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.

Leaders call deal a win over protectionism

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,” she added.

The White House did not immediately respond to a request for comment.

Brazilian President Luiz Inacio Lula da Silva, a longtime advocate of the trade deal, hailed it as a victory 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 posted on X.

Final push for deal came after EU demanded more concessions for farmers

But Lula skipped the signing ceremony, signaling simmering tensions between the trading blocs.

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 for farmers scared of a surge in cheap agricultural imports.

Robbed of the spotlight, Lula was outraged at what was widely seen in South America as the latest example of the EU’s overbearing demands.

One of the main reasons the deal took so long to clinch was Brussels’ demands for controls on South American agricultural processes, from deforestation regulation to rules on plastic packaging, as European farmers complained they couldn’t compete if their South American counterparts were held to lower standards.

“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.

Some European farmers hope to block ratification

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 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.”

Šefčovič didn’t name Trump, but as the U.S. threatens higher tariffs the commissioner said the 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 wins over skeptical Milei

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.

By Nayara Batschke.