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The EU-Mercosur Free Trade Agreement

January 20, 2026
Patrick Li

Whether it be the kidnapping and subsequent removal of Venezuela’s then president Nicolas Maduro, tariffing Western European allies following vehement backlash (as a result of controversy-stirring remarks regarding a strategic acquisition of Greenland), or even being quite possibly the single-handedly biggest reason about NATO’s imminent collapse, it is abundantly true that Donald Trump has given both the European Union and Latin America the short end of the stick.

It is also no secret that now, the EU and Latin America are making a greater effort to draw closer. On November 9 and 10, the EU met with 33 countries that comprise the Community of Latin American and Caribbean States (CELAC) in Santa Marta, Colombia. Last week, the Council of the EU and the European Parliament ratified a deal with Mercosur, an FTA bloc centered on Argentina and Brazil.

Why It’s Happening

The deal, nearly a quarter of a century in the making, slowed due to protectionist lobbying on both sides of the aisle, specifically from European farmers who fear that South American agriculture undercuts business. Yet, two things have shifted. First, the commission adopted new guidelines and measures to repatriate farmers for any potential losses, and has since agreed to make a bigger effort to inform them of the safeguards, a hotspot for debate, specifically the validity of these claims. The war in Ukraine, in tandem with tensions reverberating from China, has also underpinned the need for the EU to diversify its alliances.

Secondly, and more obviously, Donald Trump. In the past, discussions of free trade and globalism have always stirred up Western Europe’s ever nationalistic conservative blocs (and have been the main roadblock to Mercosur ever happening). However, in the past months, Trump’s string of fiscally explosive events—invading Venezuela, which has caused unrest in Latin America, threatening to annex Greenland and subsequently threatening to collectively impose tariffs on all of Europe in response to backlash—have perhaps exponentially raised alarm bells over the need to curb exposure to American trade. European Commission President Ursula von der Leyen, who heads the EU's executive branch, made this abundantly clear while at the passing ceremony: "It reflects a clear and deliberate choice: We choose fair trade over tariffs. We choose a productive long-term partnership over isolation.”

What’s In It?

The current proposed full partnership agreement with Mercosur, which specifically includes clauses on political cooperation, solidifies and expands an existing commercial relationship worth approximately $150 billion a year. The deal removes tariffs on approximately 90% of trade in goods on both sides, although this is spread over 12 years. In a study published in July, the commission calculates that the agreement will boost EU exports by €49bn ($56bn) and those of Mercosur by €9bn.

Additionally, after imposing environmental and animal welfare regulations, strict quotas on farm products like beef and sugar and staggered timelines for tariff reductions, the EU sweetened the deal even more with the promise of greater subsidies; this pushed agricultural powerhouse Italy (which had previously ardently opposed) across the line in voting, and finally allowed the deal to be passed.