BRUSSELS — The European Union’s leaders are set to sign a landmark trade agreement with South American nations to create what they have trumpeted as the world’s largest free-trade zone.
This deal is more than 25 years in the making. But its culmination comes at a time when the EU is moving with a new, urgent sense of purpose, as President Donald Trump upends long-standing alliances and the norms of global trade.
The EU voted this month, despite stiff opposition from some of its 27 nations, to approve the deal with the trade bloc known as Mercosur, which includes South America’s two biggest economies, Brazil and Argentina, along with Paraguay and Uruguay. EU leaders are headed to Paraguay on Saturday for a signing ceremony, after years of negotiations on the pact, which will cut tariffs on an array of signature products from Argentine beef to German cars.
Along with Trump’s tariff blitz, his administration’s wavering interest in being responsible for European security and general disdain for the EU have spurred a push to “diversify” and “de-risk” from the United States. In other words, Europe is looking for other friends and hedging its bets.
As jilted U.S. allies like Europe and Canada close ranks against Washington, the EU has sped up trade talks with Malaysia, the United Arab Emirates and other countries. In the fall, the EU inked a trade accord with Indonesia and now hopes to clinch a big one with India.
European Commission President Ursula von der Leyen, head of the E.U.’s executive branch, has declared that Europe is charting its own course. “Only if we are economically strong, we can secure our independence,” she said before the trip to South America.
European officials have emphasized the contrast between forming a free-trade zone of more than 700 million people and Washington imposing tariffs and threatening military power, as well as suspending cooperation not only on trade but also on climate, health and international aid.
With South America balancing its interests vis-à-vis the United States and China, EU leaders have also cast the Mercosur deal as a way for the EU to assert itself as a global player — and a steady hand in troubled times.
Still, Europe’s push to branch out from the U.S., its biggest export market for goods, has also created friction. The bloc has grappled with its own strained relationship with Beijing and economic competition from China. And securing the backing of all 27 EU member countries in trade negotiations is tough, given occasionally conflicting national priorities.
The European Parliament must now ratify the Mercosur treaty, which could take months, and opponents, especially in France and Poland, are threatening to sink the deal.
The accord has long faced opposition over environmental protection and deforestation concerns. In particular, farmers and beef and poultry producers also argue that the influx of cheaper goods from South America, with looser production standards, would dent their livelihoods.
France, Poland, and Italy had sought to block or water down the deal over worries from farmers, a powerful lobby and economic pillar. But Trump’s tariffs and domestic political turmoil in France may have left Paris, historically an EU heavyweight, with little sway.
For France’s EU neighbors, the state of international politics seems to have outweighed the traditional preference for consensus. “Other member states were of the view that we cannot really delay this much further, that there would be a huge loss of credibility for the European Union if it cannot go ahead at this time,” said Ignacio García Bercero, a former EU trade negotiator and senior fellow at Bruegel, a Brussels-based research institute.
The Mercosur deal long predates Trump, Bercero said. “Now it is clear, however, that in the current geopolitical context, concluding this type of agreement is more important than ever,” he added. “When we are facing a very disruptive situation, not only with the United States, but also China, it becomes more important than ever to consolidate your trade agreements, to expand your alliances.”
As the E.U.’s 27 heads of state and government debated the deal in December, European farmers rumbled into Brussels on tractors to protest. French farmers did the same on the streets of Paris this week, blocking roads near the Eiffel Tower, and have pledged to clog the streets again next week in Strasbourg.
Other industries, however, are keen to tap into the South American market, such as carmakers in Germany, which have been buffeted by Chinese competition and U.S. tariffs.
The European Commission made 11th-hour concessions, including billions in agricultural aid, which brought Italian Prime Minister Giorgia Meloni onside and ultimately secured a majority for the political green light last week.
The commission, which says it addressed grievances with safeguards and quotas on South American imports, will focus now on winning the support of the European Parliament, according to trade spokesman Olof Gill. Gill described the deal as “a geopolitical signal,” adding that the commission has “built in every necessary protection for our farmers.”
European Council President António Costa, who is also attending the ceremony in Paraguay on Saturday, pledged in a statement that the deal would not only benefit European businesses but also “boost the EU’s sovereignty and strategic autonomy.”
Confronted with Trump’s tariffs, EU leaders so far have averted a spiraling confrontation by signing a skeletal trade deal last year. Still, they have tried to show that they can lead in maintaining open and orderly global markets despite America’s protectionism.
While Brussels has boasted that the Mercosur accord will create the largest free trade zone of its kind, economists expect only a limited boost for the EU economy. EU exports to Mercosur countries stood at around 55 billion euros in 2023, while exports to the U.S. in 2023 were over 500 billion euros.
The deal will probably bring some benefits, by lifting barriers and encouraging higher EU exports, though its “overall economic impact remains modest,” analysts at ING, the global bank headquartered in Amsterdam, wrote this week. Even so, they added, the “true value of the deal goes beyond simple economics.”
“It sends strong signals to the U.S. and China” that the EU is serious about curbing reliance, the ING analysis said, and it could create momentum to finalize other languishing talks, including with India: “For the EU, this is not just about trade — it’s about securing strategic resources and counterbalancing global competitors.”
If ratified, the agreement would deepen EU ties to a region in which China is the largest trading partner and which the Trump administration has declared to be a U.S. sphere of dominance. Just this month, Trump ordered strikes on Venezuela, which borders Brazil, and U.S. forces captured President Nicolás Maduro.
Venezuela was suspended from Mercosur about 10 years ago over trade and human rights commitments. Bolivia, which recently joined, can eventually join the EU trade deal.
