The European Union and the South American bloc Mercosur on Saturday signed a long-negotiated free trade agreement in Paraguay, paving the way for the EU's largest-ever trade deal after 25 years of talks.

The accord, signed by representatives of the EU and Mercosur members Brazil, Argentina, Paraguay and Uruguay at a ceremony in Asuncion, now requires approval by the European Parliament and ratification by national legislatures in the four South American countries. While the agreement has faced strong opposition in parts of Europe, ratification in Mercosur is expected to be less contentious.

EU Commission President Ursula von der Leyen hailed the agreement as a landmark moment, saying it marked a choice of "fair trade over tariffs" and "a productive long-term partnership over isolation." 

Paraguay's President Santiago Pena described the deal as "a clear signal in favor of international trade" at a time of heightened global tensions.

Diversifying trade ties

European Council President Antonio Costa said the agreement sent a message in defence of rules-based free trade, multilateralism and international law, contrasting it with what he called the use of trade as a geopolitical weapon.

The deal comes as countries seek to diversify trade ties amid an aggressive use of tariffs and trade threats by US President Donald Trump's administration. Together, the EU and Mercosur represent around 30 percent of global GDP and more than 700 million consumers.

If approved, the treaty will eliminate tariffs on more than 90 percent of bilateral trade and is expected to enter into force by the end of 2026.

'Fair trade over tariffs'

At the ceremony in Asuncion, Paraguay, Von der Leyen said: "We choose fair trade over tariffs, we chose a productive long-term partnership over isolation."

European Council head Antonio Costa said the deal sent "a message of defense of free trade, based on rules, of multilateralism and international law as the basis for relations between countries and regions."

He said it stood in contrast to "the use of trade as a geopolitical weapon."

The long-awaited agreement comes amid the sweeping use of tariffs and trade threats by US President Donald Trump's administration, which has sent countries scrambling for new partnerships.

Together, the EU and Mercosur account for 30 percent of global GDP and more than 700 million consumers.

The treaty - which still needs to be approved by the EU parliament and ratified by each Mercosur nation  eliminates tariffs on more than 90 percent of bilateral trade.

It is expected to come into force by the end of 2026.