The signing ceremony in Paraguay’s capital, Asunción, marks a major geopolitical victory for the EU in an age of American tariffs and surging Chinese exports, expanding the bloc’s foothold in a resource-rich region increasingly contested by Washington and Beijing.

It also sends a message that South America keeps diverse trade and diplomatic relations even as U.S. President Donald Trump makes an aggressive push for geopolitical dominance across the Western Hemisphere.

Mercosur consists of the region’s two biggest economies, Argentina and Brazil, as well as Paraguay and Uruguay. Bolivia, the bloc’s newest member, can join the trade deal in the coming years. Venezuela has been suspended from the bloc and isn’t included in the agreement.

Promoted by South America’s renowned grass-fed cattle-raising countries and Europe’s industrial interests, the accord’s gradual elimination of more than 90% of tariffs creates one of the world’s largest free trade zones and makes shopping cheaper for more than 700 million consumers.

Geopolitical undertones

European Commission President Ursula von der Leyen, who heads the EU’s executive branch, portrayed the deal as a bulwark against the disruptive policies of the Trump administration.

“It reflects a clear and deliberate choice: We choose fair trade over tariffs. We choose a productive long-term partnership over isolation,” von der Leyen declared in an veiled rebuke to Trump’s trade policies at the ceremony, which got underway as Trump announced 10% tariffs on eight European nations over their opposition to American control of Greenland.

“We will join forces like never before, because we believe that this is the best way to make our people and our countries prosper.”

Brazilian President Luiz Inácio Lula da Silva, a long-time advocate for the EU-Mercocsur deal as negotiations lumbered through his three nonconsecutive presidential terms, hailed the agreement as symbol of global cooperation.

“At a time when unilateralism isolates markets and protectionism inhibits global growth, two regions that share democratic values and a commitment to multilateralism choose a different path,” Lula said in an X post.

Lula’s decision to skip the ceremony signaled that tensions simmered between the trading blocs.

European farmers

Brazil, which held the rotating presidency of Mercosur last year, had been gearing up to host the signing ceremony in the country’s capital, Brasília, last month, when European countries called it off, demanding more concessions to farmers scared of the possible dumping of cheap South American agricultural imports.

Lula, robbed of his spotlight, was outraged at what was widely seen in South America as the latest example of the EU’s bureaucratic intrusiveness. One of the main reasons the deal took so long to clinch was Brussels’ attempts to manage South America’s agricultural production processes, from standards on plastic packaging to deforestation regulation.

“The EU’s maximalist wish lists of demands from developing economies willing to sign free trade agreements are often perceived as patronizing,” said Agathe Demarais, a senior policy fellow with the European Council on Foreign Relations.

After imposing environmental and animal welfare regulations, strict quotas on farm products like beef and sugar and staggered timelines for tariff reductions, the EU sweetened the deal even more for its farmers with a promise of hefty subsidies. That pushed agricultural powerhouse Italy across the line earlier this month.

But even as the ink dried on Saturday, powerful protectionist lobbies in Europe were still hoping to prevent the agreement from clearing its one final hurdle: ratification by the European Parliament.

France remains opposed to the accord, with President Emmanuel Macron worrying that farmers’ frustration with the EU could drive more voters to the country’s far right in the 2027 presidential election.

“Everything will depend on the political appetite of the European Parliament,” said João Paulo Cavalcanti, a Brazilian lawyer specializing in international trade. “That could clearly create an obstacle to approval.”