EU-Mercosur trade agreement, 25 years in the making, provisionally took effect on May 1, 2026.
It created one of the world’s largest free trade zones for 700 million consumers.
It slashes duties on 90% of goods over 10-15 years.
The deal sparked fierce resistance from European farmers and is riddled with legal challenges.
The European Union (EU)-Mercosur trade agreement, which was 25 years in the making, came into force, at least provisionally, on May 1, 2026.
Mercosur or the Southern Common Market is a regional South American trade bloc established in 1991, comprising Argentina, Brazil, Bolivia, Paraguay and Uruguay. The deal between the EU and the Mercosur bloc creates one of the biggest free trade zones in the world, covering a market of 700 million consumers, as data by the European Commission showed.
The EU-Mercosur Partnership Agreement and the EU-Mercosur Interim Trade Agreement (ITA) were signed on January 17 and the enforcement of ITA requires consent of the European Parliament. But just one day after the formal signing, the ratification ran into trouble, as the lawmakers of the 27-member EU voted (334 votes in favour to 324 against) to send the trade deal to European Court of Justice for a judicial review.
On May 1, 2026, European Commission President Ursula von der Leyen decided to provisionally enact the agreement, effectively bypassing the European Parliament. The decision is being challenged through EU legal actions before the bloc’s courts. However, a final EU court ruling could take up to two years.
The deal will remove duties on over 90 per cent of goods exported to EU from the South American countries and vice versa. Tariffs already in place will decline in a planned phase-out period of 10-15 years. By the end of this period, custom duties on a vast majority of products will be reduced to zero. Agricultural products and critical minerals from Mercosur, and cars, chemicals, and pharmaceuticals from Europe, will likely be the main beneficiaries.
Beyond trade and tariffs, the agreement also reflects EU’s attempt to diversify partnerships and reduce dependence on China amid rising geopolitical uncertainty. Mercosur countries possess key critical minerals such as lithium, nickel and rare earth elements that are important for Europe’s industrial and clean energy ambitions.
The European Commission projects that the agreement will remove more than €4 billion worth of duties on EU exports annually. Current goods trade between the two blocs stands at €111 billion annually. By 2040, the Commission estimates that the agreement will boost EU exports by €49 billion and Mercosur exports by €9 billion.
However, European farmers fear unfair competition and say the deal will undercut European agriculture by allowing cheaper foreign products to replace domestic goods, even as investment by local farmers is restricted.
Since December 2025, a wave of agrarian anger has swept across Europe, from farmers blocking the famous Arc de Triomphe in Paris to tractors descending upon the EU Parliament in Strasbourg, France.
France, which is Europe’s major agricultural producer, and where much of the protests are centred, wants stronger protections for farmers. France was also one of the five countries which had voted against signing the deal on January 9, along with Ireland, Poland, Hungary and Austria.
Meanwhile, the Council of the European Union said that there should be a close monitoring of imports of sensitive products and that nations should inform the Commission of any trends in imports that might call for imposition of safeguard measures and temporary suspension of tariff preferences in case of “serious injury to EU farmers”.
Serious injury is defined as a rise in import volume or a decrease in prices by over 8 per cent compared to the three-year average. Further, the Commission should present a monitoring report at least every six months. However, experts pointed out that these safeguards are not a part of the formal agreement.
“These safeguards are internal procedures of the EU and do not belong to the agreement. It is hard to foresee how the Mercosur countries will react to their application,” Andrés Malamud, senior research fellow at the Institute of Social Sciences, University of Lisbon, told Down To Earth.
The deal also classifies certain products as “sensitive commodities” in the agriculture sector, for which “safeguard” clauses have been included. These products include beef, poultry meat, milk powder, cheese, rice, maize, sorghum, sugar, honey, ethanol, biodiesel, among others. These clauses limit tariff-free quotas for Mercosur products. As per the safeguard measures, if there are sudden, sharp rises in imports, EU can take action to limit them.