What the EU–Mercosur deal could mean for European business, and Made in Italy

After more than two decades of negotiations, the European Union’s long-delayed trade agreement with the Mercosur bloc has moved a step closer to reality. Italy voted in favour of the deal in the latest Council vote, helping to secure the qualified majority needed to advance the agreement after years of political deadlock.

Rome’s decision has revived momentum around the accord and cleared the way for the next phase of the process, including preparations for a formal signature. 

Commission President Ursula von der Leyen is now expected to travel to Paraguay to advance the agreement with Mercosur, which includes Brazil, Argentina, Uruguay and Paraguay.

Built on gradual reciprocity rather than immediate market opening, the deal would rank among the EU’s most significant trade pacts in a generation. For European businesses, it promises preferential access to a market of more than 260 million people. For critics, it raises familiar questions about agriculture, environmental standards and the uneven distribution of gains.

A market opening, with familiar trade-offs

The clearest beneficiaries would be industrial exporters, particularly in sectors where tariffs remain high. European carmakers currently face duties of up to 35 per cent in South America. Under the agreement, those tariffs would be phased out over seven to fifteen years, a change that could make European vehicles significantly more competitive and strengthen the continent’s automotive supply chains.

Manufacturers of industrial machinery, chemicals and pharmaceuticals would also see barriers fall. Tariffs of roughly 20 per cent for machinery and nearly as high for chemicals and medicines would be dismantled over time, reinforcing Europe’s advantage in high-value, technology-driven exports.

Italy’s consumer champions

For Italy, the implications of the deal extend well beyond heavy industry. Fashion, textiles, wine and spirits, all pillars of the Made in Italy export model, remain among the sectors most exposed to South American tariffs, which can reach 35 per cent. 

Under the agreement, many of those duties would be eliminated, offering Italian luxury brands, designers and producers new room to grow in markets where demand for European goods is rising. That prospect has sharpened attention in Rome, where the government of Giorgia Meloni has sought to balance export ambitions with domestic political sensitivities. 

While business groups have welcomed the deal’s potential to boost Italian brands abroad, agricultural interests have remained wary. Agriculture is where the tensions are most acute. 

Dairy products would gain only partial access through tariff-rate quotas rather than full liberalisation, and beef exports would be capped even as tariffs fall. The structure reflects an effort to protect European farmers while allowing limited market opening; a compromise that has failed to fully reassure rural constituencies, particularly in northern Italy. 

One of the agreement’s less visible but most consequential elements for Italy lies in geographical indications. Roughly 350 European products would receive legal protection, strengthening safeguards for Italian and other European brand names long vulnerable to imitation abroad. 

For many producers, this protection is as strategically important as tariff relief itself.

Momentum, with limits

Italy’s vote has shifted the political arithmetic in Brussels, but it has not eliminated opposition. 

Poultry and sugar producers remain among the most vocal critics, warning that even limited quotas for Mercosur exports could disrupt already fragile sectors. Their concerns underscore the political reality facing Brussels: the economic benefits of the deal are broad but uneven, while the costs are concentrated and highly visible.

For European businesses, the EU-Mercosur agreement now looks closer than it has in years. But its fate will depend less on economic logic than on whether EU leaders can manage the domestic trade-offs that the deal has once again brought to the fore.