After 20 Years of Negotiations, 90% of Tariffs to Be Cut! EU and Mercosur Sign Free Trade Agreement: Trade Barriers Ease, Transatlantic Cooperation Warms Up?

On January 17, 2026, at a signing ceremony held in Asunción, the capital of Paraguay, the European Union and Mercosur formally signed a Free Trade Agreement (FTA). European Commission President Ursula von der Leyen stated that the agreement is “about connecting continents” and represents a choice in favor of fair trade and open cooperation.

The core of the agreement is the gradual elimination of more than 90% of bilateral tariffs, along with the reduction of non-tariff barriers. Mercosur is one of the EU’s major export destinations for machinery, automobiles, chemical products, and pharmaceuticals. The signing of the agreement means broader market access for European companies.

For the European chemical industry, the agreement represents tangible export growth potential. The EU Directorate-General for Trade forecasts that the agreement could increase EU exports to Mercosur by 39% by 2040.

Chemical products are among the EU’s main export categories to Mercosur. Once the agreement enters into force, European chemical companies will be able to enter a market of more than 270 million consumers at lower cost, while also sourcing key raw materials from Mercosur countries, thereby diversifying their supply chains.

The signing of the agreement comes at a time when the European chemical industry is undergoing structural adjustments. Recent developments have already signaled changes within the sector, and the EU–Mercosur FTA may offer new growth opportunities for these companies.

Economic growth forecasts for Mercosur member states also provide an optimistic outlook for this cooperation. In particular, strong growth is expected in energy and mining projects related to lithium, copper, and hydrocarbons—sectors that rely heavily on chemical products.

Although the agreement has been signed, it still requires completion of the ratification process before it can enter into force. The agreement must receive formal approval from the European Parliament and the legislatures of each Mercosur member state. The entire ratification process is expected to be completed by the end of 2026, at which point the agreement will officially take effect.

The European chemical industry is calling for an accelerated approval process. In a statement, CEFIC emphasized: “We can finally see the finish line—we cannot wait any longer.” This reflects the industry’s strong desire to capitalize on new trade opportunities as soon as possible.

Annual bilateral trade between the EU and Mercosur exceeds €111 billion, with chemical products accounting for a significant share. With the signing and eventual implementation of this free trade agreement, European chemical companies are expected to find a new balance across both sides of the Atlantic.