The European Union and the Latin American trade bloc Mercosur signed a contested and long-awaited free trade agreement in Asunción on Saturday — as some European countries face further tariffs set by Washington.
The deal paves the way for one of the world’s largest free trade areas, covering more than 700 million people and a combined economic output of around $22 trillion.
The agreement between the EU’s 27 member countries and Mercosur countries Brazil, Argentina, Uruguay and Paraguay is intended to boost trade between the economic blocs.
Some 25 years in the making, it was inked by European Commission President Ursula von der Leyen and European Council President António Costa in Paraguay’s capital.
Other attendees at the ceremony at the Central Bank in the Paraguayan capital included Argentinian President Javier Milei, Paraguay’s President Santiago Peña and Uruguayan President Yamandú Orsi.
The European Parliament still has to approve the agreement before it can enter into force.
Signals to Trump
The new free trade area is also intended as a signal offsetting US President Donald Trump’s protectionist trade policy. The aim is to dismantle trade and tariff barriers between the EU and the Mercosur states as much as possible.
The deal was inked as Trump announced fresh tariffs on eight European countries over their stance on Greenland.
Washington will impose a 10% tariff on imports from the eight European countries from February 1, Trump said in a post on Truth Social on Saturday.
Citing disagreements over Greenland, which he wants to own, Trump said the tariff will apply to all goods sent to the US from Denmark, Norway, Sweden, France, Germany, the United Kingdom, the Netherlands and Finland.
The levy is set to rise to 25% from June 1 and will remain in place «until such time as a Deal is reached for the Complete and Total purchase of Greenland,» Trump said.
Costa, speaking from Paraguay, said: «If we want prosperity, we must open markets, not close them. We must create zones of economic integration, not raise tariffs.»
When asked about Trump’s tariff announcement at a press conference, he said: «The EU has always been very determined in defending international law – and, of course, especially in the territory of a member state.»
Economic boost from deal
Von der Leyen welcomed the EU-Mercosur deal, saying it would benefit both economic blocs and calling it a «win-win partnership.»
The commission estimates that the agreement could increase annual EU exports to South America by up to 39%, or around €49 billion ($57 billion) — supporting more than 440,000 jobs throughout Europe.