The EU-Mercosur Agreement for Business

The EU Mercosur agreement: where it stands

The EU Mercosur agreement creates one of the largest free trade areas in the world, linking the EU with Argentina, Brazil, Paraguay and Uruguay. After negotiations that began in 2000, the parties reached a political agreement on 6 December 2024. On 3 September 2025, the Commission proposed to split the deal into two legal instruments: the EU-Mercosur Partnership Agreement (EMPA), which covers political cooperation and trade, and an interim Trade Agreement (iTA), which covers trade matters within the EU's exclusive competence. According to the Commission, the Council authorised the signature of both instruments on 9 January 2026, and the EU and Mercosur signed them on 17 January 2026.

Since 1 May 2026, the interim trade agreement has been provisionally applied. The Commission explains that provisional application follows the Council's decision in January to empower it to apply the agreement provisionally from the first ratification by a Mercosur country. The iTA will be repealed and replaced by the EMPA once the latter has been fully ratified and enters into force, which requires ratification by all Member States as well as the Mercosur countries. For German exporters, importers and investors, the provisional application means that tariff cuts and new market access rules already apply, while the political debate about the agreement continues.

Why the EU Mercosur agreement matters for German business

Mercosur is an important market for European industry. According to the Commission's trade statistics, EU exports to the four Mercosur countries amounted to EUR 53.3 billion in 2025, while Mercosur exported EUR 56.1 billion to the EU. EU exports were dominated by chemicals and pharmaceutical products, machinery and appliances and transport equipment, while Mercosur's exports to the EU were mainly agricultural and mineral products. The EU is also the largest foreign investor in the region.

German companies have a long history in Brazil and Argentina, particularly in the automotive, machinery, chemical and pharmaceutical sectors. High tariffs and non-tariff barriers have so far made trade costly. The EU Mercosur agreement significantly reduces these barriers, which may change the economics of supply chains, local production and export strategies.

Tariff reductions under the EU Mercosur agreement

According to the Commission's factsheet for exporters, provisional application brings immediate and phased tariff cuts for key EU exports to Mercosur:

• Electric and hybrid vehicles: duties fall immediately from 35% to 25%.
• Cars with internal combustion engines: duties are halved from 35% to 17.5%.
• Car parts: duties are gradually dismantled for 90% of EU exports over ten years, with a first cut on day one.
• Machinery and appliances: current duties of 14% to 20% are dismantled for 93% of EU exports, mostly over ten years.
• Pharmaceuticals: tariffs of up to 14% start a ten-year transition to zero for 90% of EU exports.
• Textiles: duties of 35% start an eight-year transition to zero for all EU exports to Mercosur.

For agri-food products, the Commission's agricultural factsheet states that tariffs are eliminated immediately for several products, such as high-value sparkling wines, certain fruit and vegetable oils, and that most other products benefit from an initial tariff cut and full liberalisation after four, eight, ten or fifteen years. Mercosur countries also protect 344 EU geographical indications, including German products such as Münchener Bier. In the other direction, the EU opens its market to Mercosur agricultural products through tariff rate quotas for sensitive products such as beef, poultry, sugar and ethanol, combined with a safeguard mechanism.

Rules of origin under the EU Mercosur agreement

As with every EU free trade agreement, only goods that originate in the EU or Mercosur benefit from preferential tariffs. The product-specific rules of origin determine how much processing must take place in the region, for example through a change of tariff classification, a maximum share of non-originating materials or specific processing steps. For German manufacturers with global supply chains, especially in the automotive and machinery sectors, checking origin can be complex, because components from China, the United States or other third countries may prevent a product from qualifying.

The Commission recommends that exporters use the Rules of Origin Self-Assessment tool (ROSA) on the Access2Markets portal and notes that exporters may need approved exporter status or registration in the Registered Exporter system (REX) to declare the origin of their goods themselves. Companies should collect supplier declarations, calculate origin for each product and keep the documents for possible verification by customs authorities. Incorrect origin declarations can lead to subsequent duty demands against customers and to liability claims, so internal processes and contractual allocation of origin responsibilities are important.

Services, public procurement and technical barriers

The interim agreement also covers services and public procurement. The Commission highlights new opportunities in financial, postal and telecoms services, rules on the temporary movement of service suppliers and the right of EU service suppliers to establish an enterprise and supply most services on an equal footing with domestic suppliers. EU companies gain access to government contracts in Argentina at federal level, Brazil at federal and sub-central level and Uruguay at federal level, with some exceptions; access in Paraguay is to follow within three years.

On technical barriers to trade, the agreement provides clear rules on labelling, a commitment to align with international standards and recognition of EU conformity assessment results for certain product characteristics, such as safety aspects of electrical and electronic equipment. Disputes between the parties are resolved by independent arbitration. For German companies, these provisions can be as valuable as tariff cuts, because they reduce the cost of certification and market access.

Sustainability and the political debate

The EU Mercosur agreement remains controversial. Farmers' organisations in several Member States fear competition from Mercosur agricultural imports, and environmental groups have raised concerns about deforestation and climate commitments. The EU has responded with safeguard mechanisms for sensitive agricultural products, enhanced controls and a proposal to strengthen protections for EU farmers. The agreement includes a trade and sustainable development chapter, and EU rules such as the regulation on deforestation-free products apply independently of it.

For companies, the political debate means that the long-term framework is not entirely settled. The full partnership agreement still requires ratification by all Member States, and legal and political challenges may affect the timetable. Businesses should nevertheless plan on the basis that the interim agreement applies, while monitoring developments that might affect specific products or sectors.

Investment and establishment

Beyond trade in goods, the EU Mercosur agreement improves conditions for establishing and operating businesses in the region. European service suppliers can establish an enterprise and supply most services on an equal footing with domestic and foreign suppliers, subject to the commitments and reservations of each country. Intra-corporate transferees and contractual service suppliers can temporarily enter the territory of the other party for business purposes, which simplifies the deployment of engineers, managers and specialists for installation, maintenance and project work.

Investors should not assume that the trade agreement offers protection comparable to a bilateral investment treaty. They continue to rely mainly on domestic law, bilateral investment treaties where they exist and contractual protections such as arbitration clauses and political risk insurance. When structuring investments, companies should consider tax treaties, local corporate law requirements and exchange control rules, which can differ significantly between the four countries.

Opportunities and obligations for importers

The EU Mercosur agreement also reduces EU duties on many products imported from Mercosur, including industrial goods and, within quotas, agricultural products. German importers, for example in the food, chemicals and raw materials sectors, can benefit from lower duties if their suppliers provide correct origin documentation. At the same time, importers bear the risk of subsequent duty demands if origin declarations turn out to be wrong, and must comply with EU product rules, sanitary and phytosanitary requirements and, for certain commodities, due diligence obligations under the EU deforestation regulation. Supply contracts with Mercosur suppliers should therefore contain clear warranties on origin, documentation duties and indemnities.

Ratification of the partnership agreement in Germany

While the interim trade agreement covers matters within the EU's exclusive competence and can be concluded by the EU alone, the broader partnership agreement also covers areas in which the Member States retain competence. It therefore has to be ratified by each Member State in accordance with its constitutional requirements. In Germany, this requires a federal act approving the treaty under Article 59(2) of the Basic Law, adopted by the Bundestag with the participation of the Bundesrat. The ratification debates in Germany and other Member States will keep the agreement on the political agenda, but they do not affect the provisional application of the interim trade agreement as long as it remains in place.

Companies should therefore distinguish between the trade rules that already apply and the political and cooperation elements of the partnership agreement that will follow later. For most commercial decisions, the interim agreement is the relevant instrument.

Contractual and compliance consequences

The new tariff landscape affects existing contracts. Supply and distribution agreements with Mercosur customers may need to be adjusted to allocate the benefits of tariff reductions, clarify Incoterms and customs responsibilities, and require suppliers to provide origin information. Long-term contracts may contain price adjustment clauses that refer to customs duties. Companies considering local production in Brazil or Argentina should reassess whether exporting from Europe has become more attractive, or whether a combination of local assembly and EU components qualifies for preferences.

Export control, sanctions and anti-corruption compliance remain essential when doing business in the region. Investment in Mercosur countries is subject to local foreign investment and competition rules, and many German companies operate through local subsidiaries that need to be reviewed for compliance with the new trade rules.

How TRW & Co helps

We advise German and international companies on the EU Mercosur agreement, rules of origin, customs and trade compliance, supply and distribution contracts and investments in the region. We work with trusted local counsel in Mercosur countries where needed. Our work connects with our Spain and Latin America desk and our export control and sanctions practice; see also our notes on US tariffs and contracts and trade defence measures. Please contact us to discuss your plans. This briefing is general information, not legal advice.