After more than 25 years of negotiations, the EU and the South American bloc Mercosur have signed a free trade agreement in Asunción. The new zone covers over 700 million inhabitants and an economy worth 22 trillion US dollars. The deal also signals opposition to US President Donald Trump's protectionist tariff policy.
The signing took place at the Central Bank in the Paraguayan capital Asunción. Attendees included EU Commission President Ursula von der Leyen, EU Council President António Costa, and the presidents of Argentina Javier Milei, Paraguay Santiago Peña, and Uruguay Yamandú Orsi. Negotiations began in 1999 and concluded in December 2024 despite criticism from countries like France.
The reduction of tariffs and trade barriers aims to boost goods and services exchange. The EU anticipates a 39 percent increase in its exports to Mercosur countries Argentina, Brazil, Paraguay, and Uruguay. The agreement creates one of the world's largest free trade zones and partially offsets losses from Trump's tariffs, announced amid the Greenland conflict: 10 percent from February 1, rising to 25 percent from June 1 on goods from Germany and seven other EU countries.
"If we want prosperity, we must open markets, not close them," said António Costa. Ursula von der Leyen emphasized: "This agreement sends a strong signal to the world. We choose fair trade over tariffs." The Ifo Institute views it as an important step but calls for more deals. The BDI highlights opportunities for raw materials like lithium and copper, as well as sectors like the auto industry (currently 35 percent tariff).
Criticism comes from farmers fearing price competition with South American producers, who have protested, and environmentalists warning of rainforest deforestation and harm to biodiversity and indigenous communities. Safeguard clauses allow countermeasures in case of sharp import surges. The trade agreement requires EU Parliament approval; the partnership agreement needs ratification by states.