From 35% tariffs to their non-existence through a progressive de-escalation that will advance over time. That is the new scenario that the European Union and Argentina, Brazil, Paraguay and Uruguay have, those countries that make up Mercosur with which the European Union has signed an agreement that will create the largest free trade area in the world.
The agreement. After 26 years of negotiations, on January 9, 2026, the news broke: Mercosur (Argentina, Brazil, Paraguay and Uruguay) and the European Union they reached an agreement to create the largest tariff-free trade zone in the world. The pact was already almost confirmed but ended up being approved by the European Union with the approval of 21 countries (including Spain) and the votes against of France, Poland, Austria, Ireland and Hungary, as well as the abstention of Belgium.
After European approval, The signing will arrive next January 17 in Paraguay. Then a project will be launched that in the next 15 years will end up eliminating the tariffs that exist between both commercial zones. A pact that will make things complicated for the primary sector but which has the European industry as the great winner. And in that industry, the automobile is one of the most benefited sectors.
Why the car industry? Until now, exports from the European Union to Mercosur had tariffs of 35% on their shoulders. The pact will eliminate any type of trade barrier over 15 years. It will be gradual but after three decades, vehicle exports to South America will be completely tariff-free.
That, according to data collected by The Automotive Tribuneis expected to triple the volume of exports from the European Union to this region. It remains to be seen what steps will be taken year after year but in Infobae They already anticipate that exports are expected to Brazil and Argentina with a maximum quota limit that will expand at the same rate as tariffs are reduced.
Spain. One of the countries that can emerge the most strengthened from the agreement in the automobile sector is Spain. Although the figures point to a drop in production and export of automobiles this year, our country is the second European power in vehicle production (behind Germany) and more than 90% of the cars manufactured leave our borders.
But, furthermore, our country is a large producer of vehicle components that will also discount tariffs on their exports. The news is especially interesting for a sector that has suffered from the tariffs imposed by the United States Government. And it is that Spain does not send cars to the American country but automobile components.
Holy water for Europe. The agreement feels like holy water for European manufacturers. Currently, the cars sold in Mercosur countries are cheaper and have very poor security measures if we compare them with Europeans.
Acting without tariffs will allow them to sell more cars and amortize investments than with the European emissions policies their days may be numbered. It is a good outlet for lower priced vehicles and an opportunity to compete with higher quality cars. It allows them follow that Toyota maxim to sell in each market what each market demands.
But it also opens the door to compete with China, which was eating up the market by exporting cars in large volumes. They collect in Infobae that the measures that have tried to benefit the entry of hybrids and electric vehicles to Argentina and Brazil have ended up filling these markets with Chinese cars, which represent 80% of imports.
USA. It must be taken into account that, in addition, dark clouds had settled on the future of the European automobile industry. Tariffs on exports to the United States they had done enormous damage despite the fact that mostly high-cost vehicles were being sold there. The problem is that the most affordable ones of European origin They are mostly manufactured in Mexico so they have also been bleeding with trade barriers.
It is expected that exports to the Mercosur countries, due to purchasing power, will not generate as much money per car sold but they are expected to be much more voluminous. Eliminating tariffs will allow, as we say, to amortize investments in vehicles with lower prices and lower profit margins.
They lose. The one that, predictably, will lose will be the local industry. Right now Mercosur has an industry sustained in the production of very specific vehicles for its market and with very high trade barriers that causes a very low volume of imports. Furthermore, they provide feedback to each other since 75% of car imports in Argentina They come from Brazil.
Now the industry has the challenge of opening up and being more competitive. The problem for Mercosur is that, due to the cars manufactured, it seems that this sector only has one way and that is one way from Europe to South America. The return, with combustion vehicles and safety standards much less demanding than the European ones, everything indicates that it will be deserted.
Photo | Jeanne Menjoulet and Mercedes
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