Filenews 10 January 2026
After 25 years of tough and complex negotiations, European Union member states on Friday gave the green light to a free trade agreement with Mercosur countries, paving the way for the creation of an extensive free trade zone that will cover more than 700 million people in Europe and Latin America.
The agreement, which according to what has been leaked, will be signed in Paraguay on January 17, provides for the elimination of more than 90% of tariffs on European exports. At the same time, European consumers will be able to buy beef from the plains of Argentina, while in Brazil import duties on German cars will be significantly reduced. Despite the political noise (and great reactions) that accompanied it, its purely economic impact is relatively limited: the Commission estimates that by 2040 it will add about €77.6 billion to the EU economy, i.e. just 0.05% of GDP.
As in any major deal, there are - according to Politico's analysis - winners and losers.
The winners
Giorgia Meloni
The Prime Minister of Italy, Giorgia Meloni, once again managed to "read" the political correlations correctly. Threatening to support French opposition to the deal, she secured concessions for Italian farmers at the last minute. In exchange for Rome's support for the deal, Italy extracted agricultural market protection clauses and commitments to new financing of agriculture from the European Commission, which the government can project domestically.
The German car industry
The automotive industry in Germany is gaining easier access to Latin American markets. High tariffs, currently at 35%, will be gradually reduced, boosting sales and revenue for giants such as Volkswagen and BMW. However, the removal of trade barriers will not happen overnight, at the request of Brazil, which has its own car industry, while electric vehicles will receive preferential treatment, in a sector where Europe is lagging behind.
Ursula von der Leyen
For the President of the European Commission, Ursula von der Leyen, the agreement is a difficult but important victory, as it strengthens Brussels' position at the international level, at a time when the Union seems... with a heavy dinosaur, constantly lagging behind the US and China. After spending more than a year trying to appease sceptics and form the necessary qualified majority, she is expected to sign the deal next week in Paraguay. However, the price was heavy: commitments for €45 billion in agricultural subsidies, which overturn previous plans to limit support to the agricultural sector.
European farmers
Despite strong reactions, mainly to the low selling prices of South American products, which could lead hard-working European farmers to leave their land, the reality looks a little different. This is because the agreement includes strict quotas for products such as beef and poultry, Latin American farmers will be limited to exporting a few pieces of chicken per European per year, while special protections are also provided for European products with designation of origin, such as Italian parmesan or French wine. Combined with the generous subsidies (45 billion euros promised by Von der Leyen), the picture for the agricultural world turns out to be less ominous in the end.
The losers
Emmanuel Macron
The French president, Emmanuel Macron, has been the most staunch opponent of the agreement, under pressure from the French agricultural base. His failure to block it, despite the last-minute effort to rally allies (he seemed to get Meloni on his side), is considered another political defeat at a time when his influence on the European scene seems to be limited. After this latest defeat, criticism of the French president is expected to intensify in the national media.
Donald Trump
For US President Donald Trump, just days after the operation in Venezuela and Maduro's arrest, the agreement underscores that Europe still has powerful "soft power" tools to work constructively with like-minded partners. In contrast to the US president's approach to trade pressures and unilateral moves, the EU-Mercosur deal strengthens adversaries – including Brazilian President and Mercosur chief Inácio Lula – and partnerships that are not conducive to US strategy.
China
China had significantly strengthened its presence in Latin America (mainly its exports to Brazil), while negotiations with the EU were delayed. The new agreement gives Europe the opportunity to regain market share in sectors such as automotive, machinery and aeronautics, but also to strengthen the region's political ties with the West.
The agreement also strengthens the EU's position on direct investment, an area in which European companies continue to outperform their Chinese competitors.
From a political point of view, China has managed to some extent move countries such as Brazil away from Western positions, for example through the BRICS group, consisting of Brazil, Russia, India, China and South Africa, as well as other developing economies. Because the agreement is not only about trade, but also creates deeper political cooperation, Lula and his Mercosur counterparts will now have a closer relationship with Europe.
The Amazon
The darker side of the agreement concerns the environment. The increase in beef production threatens to accelerate the deforestation of the Amazon rainforest. Simply put, more beef for Europe means fewer trees for the world. Although the text includes clauses against illegal deforestation and commitments to the Paris Climate Agreement, concerns about the environmental impact remain acute.
