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, amid U.S. President Donald Trump’s threats of escalating tariffs on Europe over Greenland.
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.
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.
“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.
In 2024, trade between the EU and Mercosur, which encompasses a market of 700 million people, reached a value of 111 billion euros.
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.
Just before the ceremony, however, U.S. President Donald Trump vowed to impose 10% tariffs on eight European nations if the United States is not permitted to purchase Greenland.
In a post on Truth Social, he said tariffs would take effect on February 1 on goods from Denmark, Norway, Sweden, France, Germany, the Netherlands, Finland and Great Britain. The rate would climb to 25% on June 1 if no deal was in place for “the Complete and Total purchase of Greenland” by the United States, he said.
Trump is scheduled to travel on Tuesday to the World Economic Forum in Davos, Switzerland, where he likely will run into the European leaders he threatened with tariffs that would start in little more than two weeks.
