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The trade agreement between Mercosur and the European Union came into force this Friday (1st) on a provisional basis, creating the largest free trade zone in the world with 720 million inhabitants in 31 countries and a combined GDP of over US$ 22 trillion. Negotiations began in 1999 and lasted 26 years. In this initial phase, the commercial part comes into effect with the gradual reduction and elimination of tariffs. The EU is expected to eliminate up to 95% of tariffs in 12 years, and Mercosur will eliminate about 91% in 15 years.
The planet’s largest trade agreement has just come into force, and Brazil is at its center. The treaty between Mercosur and the European Union, signed in January 2026 in Asunción, came into effect this Friday (1st) with the provisional application of the commercial part, which provides for the reduction and gradual elimination of import and export tariffs between the two blocs. President Lula signed the promulgation decree on Tuesday (28th), after approval by the National Congress on March 4th, allowing Brazil to participate from day one.
But the agreement that celebrates agribusiness concerns the industry. While exporters of meat, coffee, sugar, and orange juice celebrate facilitated access to a high-purchasing-power market, national manufacturers in the automotive and consumer goods sectors face the prospect of competition from European products that arrive with lower tariffs and often with superior technology. Economist Rodrigo Provazzi warns that the agreement “requires internal policies to prevent gains from the agricultural sector from being accompanied by accelerated deindustrialization.”
What changes with the trade agreement between Mercosur and the European Union
The trade agreement creates the world’s largest free trade zone by bringing together the countries of Mercosur (Brazil, Argentina, Uruguay, and Paraguay) with the 27 members of the European Union. The EU is expected to eliminate up to 95% of tariffs on products imported from Mercosur within 12 years, while the South American bloc will eliminate about 91% within 15 years. A large part of the products with zero tariffs from the outset are industrial, benefiting sectors such as machinery, chemicals, and metallurgy.
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The application at this stage is provisional and covers only the commercial part. Its definitive entry into force depends on ratification by the European Parliament and the national parliaments of European countries, as well as legal analysis by the EU Court of Justice, a process that can take up to two years. For sensitive products such as meat and sugar, the agreement establishes export quotas: above these limits, tariffs continue to apply.
Brazilian agribusiness as the big winner of the treaty
For Brazil, the trade agreement tends to boost agribusiness exports with facilitated access to 450 million high-purchasing-power European consumers. Products such as meat, coffee, sugar, and orange juice are expected to gain competitiveness with tariff reductions, creating opportunities that the sector has awaited for over two decades since negotiations began in 1999.
European resistance to South American agribusiness was precisely what stalled negotiations for 26 years. Farmers in France protested against the risk of competition from Brazilian products, considered cheaper due to lower production costs, and President Emmanuel Macron positioned himself against the treaty. The fact that the agreement was finally signed indicates that the European Union accepted agricultural competition in exchange for gains in sectors where Europe is more efficient.
The national industry facing European competition
If agribusiness gains, the Brazilian industry enters more uncertain territory. The entry of European products with superior technology could pressure sectors such as automotive and consumer goods, where European manufacturers have advantages in scale, innovation, and reputation that Brazilian competitors can hardly match in the short term. The reduction of tariffs means that cars, machinery, and manufactured products from Europe arrive cheaper in the Brazilian market.
The agreement provides for trade safeguards that allow for the temporary reintroduction of tariffs if there is significant damage to local sectors. This safety valve exists to prevent the collapse of entire production chains, but its activation depends on bureaucratic processes that can take time to implement once competition is already established. The industry that invests in productivity and innovation will be able to compete; the one that relies exclusively on tariff protection will feel the impact.
What changes in the Brazilian consumer’s pocket
For the consumer, the effect will be gradual. Products such as European wines, cheeses, and cars may become cheaper in Brazil, but this depends on factors such as exchange rates, internal taxes, and logistics. The reduction of import tariffs, alone, does not guarantee an immediate drop in prices on supermarket shelves or at dealerships.
Provazzi explains that “the final value will depend much more on the macroeconomic environment than just the tariff.” The reduction helps, but does not guarantee low prices if the real is devalued, if state taxes are high, or if the logistics chain adds costs. For the consumer, the realistic expectation is of progressive price reduction over the 12 to 15 years of implementation, not abrupt drops in the first few months.
Environmental requirements that may limit agribusiness
The trade agreement includes environmental commitments that require respect for the Paris Agreement, with the possibility of sanctions in case of non-compliance. Products such as soy, meat, and wood cannot be linked to illegal deforestation, especially in the Amazon, a clause that may limit exports from producers who do not prove environmental compliance. The European Union‘s sanitary rules also maintain high standards on limits for pesticides, hormones, and antibiotics.
European environmentalists point to risks that increased trade could encourage less sustainable practices, despite the clauses provided in the treaty. For Brazilian agribusiness, the demands represent both a barrier and an opportunity: those who already operate with environmental certifications and traceability will have a competitive advantage; those who depend on practices incompatible with European standards will be left out of the world’s most lucrative market.
European resistance and what is missing for the agreement to be definitive
The treaty faced strong opposition in European countries, especially in France, where farmers denounce unfair competition and non-compliance with sanitary rules. Macron claimed a lack of sufficient guarantees to protect the European agricultural sector, and the issue generated political pressure that divided European Union members between free trade advocates and protectionists who fear the competitiveness of South American agribusiness.
To definitively enter into force, the trade agreement still needs approval from the European Parliament, which requested a legal analysis, and ratification by national parliaments. The process can take up to two years, during which the treaty functions provisionally and any party can, in theory, suspend its application if serious problems arise. For Brazil, the provisional phase is an opportunity to demonstrate that it can export with quality, sustainability, and volume.
Do you think the Mercosur-EU agreement will benefit your pocket more with cheaper European products or harm it with job losses in industry? Tell us in the comments if you expect to see wines and cheeses at lower prices and what you think about European competition in the Brazilian market.
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