The bloc, called the Mercosur, was established in 1991 and consists of Argentina, Brazil, Paraguay, and Uruguay. The combination forms the sixth-largest economy and has a population close to 300 million.

EU and Mercosur representatives signed the free trade agreement at a summit held in Paraguay on Saturday.

"The EU–Mercosur agreement is a historic milestone in global trade policy, reaffirming Europe's ability to shape its own economic and trade relations at a time when protectionism and geopolitical tensions are on the rise," Foreign Minister Margus Tsahkna (Eesti 200) said.

"It will give our businesses better access to one of the world's largest growth markets. It will make the Mercosur region a genuinely accessible target market for industry, services and agriculture alike," he went on via a ministry press release.

The EU–Mercosur agreement is a historic milestone in global trade policy, reaffirming Europe's ability to shape its own economic and trade relations at a time when protectionism and geopolitical tensions are on the rise. https://t.co/TIvIBisROA

— Margus Tsahkna (@Tsahkna) January 17, 2026

"The boost in competitiveness gained from the elimination of tariffs will also be supported by Estonia's plan to open an embassy in Brazil this year. This will strengthen our economic diplomacy presence and help Estonian businesses enter the market," Tsahkna said.

Under the terms of the free trade agreement, tariffs on industrial goods will be cut for nearly 90 percent of products, boosting the competitiveness of Estonian machinery, electrical equipment and medical devices. Estonia's service exports to Mercosur total about €58.5 million, mainly in telecommunications, transport and tourism. All of these sectors will benefit from services market liberalisation.

The agricultural market will open to Estonian producers while EU safeguard mechanisms remain in place. This balances new opportunities with protection against market disruption, proponents say.

In Estonia's view, the EU–Mercosur agreements comply with EU law and include sufficient safeguards. It hopes the European Parliament will recognize this legal clarity and not delay its entry into force, Tsahkna added.

The interim trade agreement will enter into force first and, after ratification, be replaced by a broader partnership covering trade and political cooperation, including security, sustainable development and science.

The Estonian government decided to support the trade agreement last November.

The agreement comes at a time when tariffs are on the agenda, following President Donald Trump's weekend threat to impose 10 percent tariffs on goods imported to the U.S. from Denmark and several other EU nations, as well as on the U.K. This figure will rise to 25 percent in June if a deal on Greenland is not struck, Trump says. It is not clear if constitutionally he will be able to impose the tariffs.

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