Mercosur Agreement with South America

The EU-Mercosur trade deal was officially ratified by Germany’s Federal Cabinet on December 18, 2025. Under Chancellor Friedrich Merz, the agreement aims to boost industrial exports while easing concerns over agricultural competition and environmental impact in South America.

The deal opens new markets for EU industrial goods, offering a potential lifeline to Germany’s struggling economy and small businesses. Analysts suggest the benefits will outweigh risks, as Mercosur nations—Argentina, Brazil, Paraguay, and Uruguay—agreed to lower tariffs on European manufactured products.

Fears of EU farmers facing heavy losses appear unfounded. Beef imports from Mercosur would represent just 1.5% of the bloc’s total production, with prices expected to drop by only 2%. The EU’s annual agricultural subsidies of €55 billion also far exceed those in South America, providing a buffer against competition. Environmental concerns have been downplayed, with beef production in Mercosur countries projected to rise by roughly 1%. This modest increase is unlikely to cause significant deforestation or ecological harm. Beyond trade, the agreement reinforces political ties with liberal democracies in South America. The move comes at a time when EU relations with the U.S. remain tense, making alternative partnerships more valuable.

The ratified deal marks a strategic step for Germany and the EU. It secures new trade routes for industrial exports while minimising risks to farmers and the environment. The partnership with Mercosur also strengthens diplomatic bonds in a shifting global landscape.