EU-Mercosur, not a done deal yet

After more than a quarter century of negotiations, the European Union and four members of the South American trade bloc Mercosur – Argentina, Brazil, Paraguay and Uruguay – finally signed a free trade agreement in early 2026. The long awaited political breakthrough has revived interest among exporters, but this does not mean that all uncertainty has disappeared. Legal hurdles, political resistance and concerns about sustainability mean that the agreement’s entry into force is still far from guaranteed.

In this article we will explain where the agreement currently stands, why implementation is proving so difficult, and what businesses can expect in the period ahead. At a time of geopolitical fragmentation and disruptions to global supply chains, the relationship between the EU and Mercosur is becoming increasingly strategic. There are substantial opportunities for European companies trading internationally that are willing to act early.

Agreement finally signed, but not all obstacles removed

The EU and Mercosur signed their historic trade agreement on 17 January 2026 in Asunción, Paraguay. The agreement has now entered the highly complex ratification phase. Full ratification requires approval by every EU member state as well as all Mercosur countries, a process that is likely to take years.

The main source of uncertainty lies in political divisions within the EU. Some member states, notably Spain and Germany, see the agreement as a strategic boost for industrial exports and access to critical raw materials. The Netherlands now also supports the agreement, following the inclusion of stronger sustainability safeguards, stricter commitments on deforestation and clearer enforcement mechanisms. Other member states, such as France and Poland, remain cautious. They fear unfair competition for farmers, weak enforcement of sustainability provisions and the risk of increased deforestation. These divisions make unanimous approval of the full trade agreement in the short term unlikely.

In addition, parts of the agreement have now been referred by the European Parliament to the European Court of Justice (ECJ) for assessment of their compatibility with EU treaties. This review could take up to one and a half to two years, creating a risk that the agreement could once again be derailed if legal shortcomings are identified.

EU-Mercosur goods trade snapshot

The following figures reflect the European Union’s trade with the four founding Mercosur countries:

• The EU is Mercosur’s second‑largest trade partner, behind China and ahead of the US. Mercosur, ranks as the EU’s tenth‑largest trade partner
• In 2024, EU exports to Mercosur reached €53.3 billion, while Mercosur’s exports to the EU totalled €57 billion
• Mercosur’s principal exports to the EU consisted of agricultural products (42.7%), mineral products (30.5%), and pulp and paper (6.8%)
• EU exports to Mercosur were dominated by machinery (28.1%), chemicals and pharmaceutical products (25%), and transport equipment (12.1%)

Market access possible before full ratification 

The European Commission could choose to split the agreement, allowing trade to begin earlier. If the European Parliament gives its consent, the EU could opt for provisional application of an interim trade agreement covering only goods trade, while the broader political and cooperation chapters would undergo a much longer ratification process.

Once the European Parliament has approved the trade pillar, provisional application would require ratification by only one EU member state or one Mercosur country, rather than unanimity. This would allow the trade component of the agreement to enter into force long before the entire treaty is fully ratified. Although the agreement would remain vulnerable to legal challenges, there is precedent for this approach, as seen with the CETA trade agreement with Canada. CETA’s trade pillar has been in force since 2017, but the chapter on investment protection still awaits approval by ten EU member states.

For exporters, the trade pillar alone would already have direct and tangible effects. Tariffs on around 91% of goods traded between the EU and Mercosur would be gradually eliminated, customs procedures would be simplified and technical standards would be better aligned. European companies would gain improved access to public procurement markets in Mercosur countries, while geographical indications  would receive stronger protection. In practice, trade would become faster, cheaper and more predictable.

Whether the European Commission will opt for provisional application of an interim trade agreement remains highly uncertain. A final vote in the European Parliament on the trade agreement had been expected by May this year at the latest, but now that the case is under review by the European Court of Justice, this will almost certainly be delayed further. The European Commission could proceed with the provisional agreement even before the ECJ has delivered its judgment, but critics may view this as an attempt to circumvent legal scrutiny. The Commission is currently in discussions with the European Parliament and EU member states to find a way forward.

Mercosur could become a key partner in the energy transition

From an economic perspective, the EU–Mercosur agreement fits seamlessly within Europe’s broader strategic priorities. One of the most important of these is diversification away from China. “The EU has an urgent need for alternative sources of critical raw materials, particularly for the energy transition, and Mercosur countries are well positioned to fill this gap”, says Greetje Frankena, Deputy Head of Economic Research at Atradius. 

Argentina has large lithium reserves essential for batteries, while Brazil is rich in graphite, manganese, nickel, bauxite and rare earth elements. Lower export taxes and clearer investment rules could significantly strengthen European supply chains.

Energy security is also a key driver. The EU is actively reducing its dependence on Russia and expanding cooperation with countries such as Brazil and Argentina, both of which are growing oil and gas producers and have significant potential for green hydrogen. This makes Mercosur an attractive long term partner.

Risks and political sensitivities remain

The agreement is not without controversy. European farmers remain concerned about competition from Mercosur producers operating under less stringent environmental and animal welfare standards. To address these concerns, the agreement includes quotas for sensitive products such as beef, poultry, sugar and certain dairy products. Strict EU import standards will also continue to apply.

Sustainability is the most politically sensitive issue. The Amazon region remains central to the debate, and the final agreement contains binding commitments on climate and deforestation. From the end of 2025 onwards, products such as soy, beef, palm oil, cocoa, coffee and rubber sold in the EU must be deforestation free. A continuing concern is whether Mercosur governments will be able to effectively enforce these rules.

The macroeconomic benefits are expected to be modest in the short term. The value of the agreement lies less in its immediate GDP impact and more in its strategic signal: a renewed commitment by both blocs to rules based trade and long term cooperation. However, before the agreement – or parts of it – can be implemented, a solution must first be found to the current impasse in the process.

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