What Does the Provisional Application of the EU-Mercosur Trade Deal Mean for European Businesses?

European businesses are expected to save billions after the provisional launch of the EU-Mercosur trade agreement. Having taken effect on May 1, 2026, the deal will gradually remove tariffs on most products traded between the European Union and Argentina, Brazil, Paraguay, and Uruguay. 

The agreement will progressively remove tariffs on over 90% of EU exports – including cars, pharmaceuticals, wine and spirits, and olive oil – while also reducing non-tariff barriers such as labeling requirements and opening public procurement markets to EU companies bidding for government contracts. 

Oscar Guinea, director at the European Centre for International Political Economy (ECIPE), told Entrepreneur Europe that the deal is expected to deliver “substantial direct and indirect benefits for European businesses, ranging from immediate tariff relief to long-term strategic advantages.” 

The European Commission forecasts EU exports to Mercosur will increase by 39% through 2040 as a result of the deal, reaching nearly €50 billion. “The benefits are real and visible as of now,” Commission President Ursula von der Leyen said through social media platform X.

Despite its provisional acceptance, ratification of the deal is expected to take longer because the European Parliament has referred it to the EU’s top court for legal scrutiny; if the arrangement requires any changes, the process could be extended even further. 

“Provisional application marks a qualitative shift in EU–Mercosur relations. After a history of more than two decades, the agreement is now beginning to take practical effect,” Pablo Sader, Uruguayan ambassador to the EU, told POLITICO.

But, according to Oliver Richtberg, head of foreign trade at Germany’s engineering federation (VDMA), gains will be slower to materialise in some products.

“In most cases, the tariff reductions will be phased in over a period of 10 to 15 years. The economic effects will therefore become apparent primarily in the medium to long term,” he said. 

A possibility worth leveraging for startups? 

Guinea argued that the agreement is indirectly set to improve the resilience of European supply chains by diversifying access to critical raw materials – including lithium and copper – which are vital for Europe’s green and digital transformations. 

Beyond manufacturing and trade flows, business leaders also expect the agreement to reshape hiring and workforce strategies.

“Agreements like EU-Mercosur open markets and redefine how companies compete for talent,” Pablo Miller, co-founder and CEO of global talent and workforce management platform Remoti, told Entrepreneur Europe. He added that, as business operations expand through regions, the ability to hire internationally, build distributed teams and access specialized talent fast will become an inevitable competitive advantage. 

“The primary beneficiaries will be EU manufacturing industries, particularly motor vehicles, machinery, and chemicals,” Guinea predicted, stressing that motor vehicle exports alone are projected to increase by €20.7 billion.

On the other hand, the agreement is also set to advance operations and digitalisation of the trade sector. 

“The next wave of industrial growth between Europe and Latin America will depend not only on trade, but also on companies’ ability to operate critical assets efficiently and at scale across multiple countries. The EU-Mercosur agreement will likely accelerate operational modernization and industrial digitalization on both sides of the Atlantic,” noted Christian Struve, co-founder and CEO of Spanish-Latin American SaaS company Fracttal.

Figures shared by the Commission project that the EU’s Gross Domestic Product (GDP) will increase by more than €77.6 billion as a direct consequence of the EU-Mercosur trade deal, and policymakers expect the creation of 600,000 new jobs in Europe. 

And as for the financial implications, commissioners also estimate that European businesses will save more than €4 billion a year due to the lower tariffs. 

Opposition: What can be done? 

The agreement has triggered resistance from European farmers who fear that cheaper South American imports could undercut domestic producers. Earlier this year, it caused mass pushback from farmers in Poland, France, Greece, and Belgium, with farmers blocking main roads in Paris, Brussels, and Warsaw.

Opponents to the deal believe that it will impact their domestic markets. A European Commission spokesperson, however, told Entrepreneur Europe that trade barriers will disproportionately affect smaller businesses compared with large companies

As per Guinea, farmers operate in an environment of tight profit margins, rising input costs, and increasing administrative burdens. “The prospect of a trade deal naturally raises fears of a potential influx of imports,” he noted.

In contrast to these fears, the Commission signals that the EU agri-food sector will benefit from easier access to the Mercosur market and more opportunities to sell produce to Mercosur’s 295 million consumers; EU exports of agricultural products to Mercosur should increase by 49% – almost €1.2 billion – with most EU agricultural sectors projected to increase their exports.

This is notably the case of fruits and vegetables (€185 million or +36%), vegetable oils (€185 million or +21%), dairy (€85 million or +102%), and beverages (€608 million or +53%). 

Regardless, the ECIPE director acknowledged broader implications of the deal on European agriculture. “Beef, poultry, and sugar will face competition from Mercosur producers. While these challenges are real, they must be viewed in perspective,” he said. 

Economic modelling, Guinea concluded, suggests a modest 1.2% production decline in the bovine sector. “To mitigate this impact, the agreement implements Tariff Rate Quotas (TRQs) that restrict low-tariff imports to a small fraction of EU consumption.”