EU eyes Mercosur deal amid rising trade war fears with U.S.

As tensions escalate with Washington, the European Union looks to South America for a long-awaited trade breakthrough.

A Béarn flag flutters on a tractor during a "Non-union" farmer protest against the EU-Mercosur trade agreement and protocols to combat bovine tuberculosis, in Bayonne, southwestern France, on January 10, 2025. Photo by Gaizka Iroz/AFP

By Anna Fadiah and Hayu Andini

The European Union is preparing to push forward with a long-delayed trade pact as the bloc faces a deteriorating relationship with the United States. As the EU eyes the Mercosur deal with Argentina, Brazil, Paraguay, and Uruguay, hopes are rising that a historic agreement may finally be sealed after decades of gridlock. The move comes amid fears of a full-blown transatlantic trade war and growing frustration in Brussels with Washington’s increasingly unpredictable economic stance.

Trade between the EU and the United States amounts to an eye-watering 1.6 trillion euros ($1.8 trillion) annually, but that relationship is being tested like never before. With tariff threats looming and political alignment slipping, the European bloc is reassessing its strategic priorities.

German Chancellor-in-waiting Friedrich Merz captured the urgency of the moment in a statement over the weekend. “The global balance is shifting, and we Europeans need new trading partners very quickly,” he said, advocating for fresh momentum behind the stalled EU-Mercosur agreement.

Merz went so far as to suggest that French President Emmanuel Macron—long an obstacle to the deal—could be convinced to change course. That optimism was quickly rebuffed by Paris, where a diplomatic source insisted the current draft “remains unacceptable.” Still, behind the scenes, EU officials see a unique opportunity to move the agreement forward.

Quarter-century in the making

The EU eyes the Mercosur deal as more than just another trade pact—it represents a potential shift in the bloc’s global posture. Twenty-five years of negotiations culminated in a preliminary agreement last December, but final approval must still come from all 27 EU member states and the European Parliament.

Supporters of the pact tout its scope and significance. With 700 million potential consumers, the free-trade zone would be one of the largest in the world. The EU would gain smoother access to export high-value goods such as machinery, automobiles, pharmaceuticals, and alcoholic beverages. In return, South American producers would be allowed to send meat, sugar, rice, and soybeans into the European market.

It’s this agricultural element that has triggered strong resistance, particularly from French and Austrian farmers who fear being undercut by cheaper imports. France, long protective of its farming sector, has repeatedly voiced concerns that South American regulations are too lax and could flood the market with lower-standard products.

Macron under pressure

French resistance is nothing new, but the shifting geopolitical landscape is piling on new pressures. EU insiders believe that Macron—facing internal pressure from his own economic advisors and the fallout from last year’s snap elections—may be more flexible than he appears.

Bank of France Governor Francois Villeroy de Galhau has reportedly told Macron that moving forward with Mercosur “could further cushion tariff shocks linked to U.S. trade policy.” As Washington becomes more unpredictable, strengthening trade links with other global partners is becoming less of an option and more of a necessity.

Despite these arguments, French Agriculture Minister Annie Genevard has remained firm, declaring that France will not “sacrifice French agriculture on the altar of an agreement at any cost.” Her words reflect deep-rooted political sensitivities, especially after Macron’s party lost its parliamentary majority in last year’s elections. Any perceived betrayal of French farmers could have explosive political consequences.

One EU official warned bluntly, “The French government would fall” if it reversed its stance now. With Macron’s centrists in the minority, such a shift could trigger a government crisis.

Growing support across the bloc

Still, support for the deal is gaining traction in other corners of Europe. While Poland continues to oppose the agreement, Austria—which had also been a holdout—appears to be rethinking its position. Austrian Economy Minister Wolfgang Hattmannsdorfer broke ranks by stating simply, “We need it now,” acknowledging the urgency of securing new economic partners in a volatile global market.

Such statements suggest that even long-time critics are beginning to reevaluate the costs of inaction. The deal requires the approval of at least 15 EU member states representing 65 percent of the population. While France had hoped to form a blocking minority, that may now be slipping from reach.

The changing tone in Vienna is particularly telling, given that the country’s coalition government is still officially opposed to the deal. The fact that high-level officials are willing to speak in favor of it reflects growing pressure to adapt to the new global environment.

Brussels prepares the next move

With momentum slowly shifting, the European Commission is preparing a final push. Brussels has proposed offering financial support to member states likely to be hit hardest by Mercosur imports, particularly farmers. These compensations could help soften resistance in countries like France, where agricultural interests remain politically potent.

EU officials aim to present a revised version of the deal before the end of summer. That would set the stage for a decisive vote in the European Parliament, although the outcome remains uncertain.

“We don’t know which way it will go,” admitted Marie-Pierre Vedrenne, a French centrist lawmaker. She warned that continuing to block the deal would be “neither serious nor responsible,” but conceded that Macron’s position seems locked in—for now.

Denmark set to reignite debate

Poland currently holds the rotating presidency of the EU and is unlikely to prioritize a Mercosur vote during its term. But that will change in July when Denmark takes the helm. Known for its pro-trade stance, Denmark is expected to bring the issue back to the forefront.

The Danish presidency could give Brussels the political space it needs to finally clinch the deal. If the EU eyes the Mercosur deal as the answer to growing global instability, it may find itself ready to take political risks it once avoided.

The message from Brussels is clear: with or without full unity, the European Union cannot afford to stand still. In the face of growing U.S. protectionism and shifting global alliances, securing new partnerships has become not just a strategic priority—but a political imperative.

A defining moment

The coming months will test the EU’s resolve. With the Mercosur deal hanging in the balance, leaders must weigh national interests against the long-term strategic future of the bloc. Can Macron be persuaded to move? Will Austria and other skeptics fully flip? Will the European Parliament give its final stamp of approval?

As the EU eyes the Mercosur deal, the stakes could not be higher. This is more than a trade pact—it’s a referendum on the bloc’s ability to adapt in a fractured world. And with time running out, Brussels is preparing for one final push.