Why the EU-Mercosur Trade Deal Is Crucial for Luxury Expansion

MILAN — Luxury industry concerns hit a peak this year after U.S. President Donald Trump announced his trade policy that involved a 15 percent tariff on all exports. Since then, leaders here have been banking on a reprieve that hinges on the swift approval of a crucial European Union deal with Mercosur, the South American bloc that includes Argentina, Brazil, Paraguay and Uruguay. This deal, for which talks commenced in 1999, could potentially create the world’s biggest free-trade area.

Brazil, which is by far the biggest Mercosur nation with a population of about 213 million, is ripe for luxury expansion. The nation is currently highly protected with an applied customs duty averaging 13.5 percent, according to the European Commission. 

On Wednesday, Italy‘s Prime Minister Giorgia Meloni said Italy won’t sign off on the trade deal until further revisions are made to protect European farmers, who have expressed concerns about, among other issues, a potential flood of cheap imports.

“We believe that signing the [Mercosur] agreement in the coming days… is still premature,” Meloni told the lower house of Italy’s Parliament. Meloni added that Italy was waiting for additional measures that would protect the agricultural sector. She said that she also needed to discuss such changes with the nation’s agricultural alliances.

“It does not mean that Italy intends to block or oppose it, but it intends to approve the agreement only when it includes adequate reciprocity guarantees for our agricultural sector,” she added, highlighting that she was confident that these conditions would be met by the beginning of 2026.

President Emmanuel Macron echoed this. At a cabinet meeting on Wednesday, he said France would “firmly oppose” the European Union forcing through a trade deal with South American bloc.

Italy’s Fashion Sector Reacts

On Wednesday, Italy’s industrial federation Confindustria Moda responded to the delay, urging a speedy resolution.

“Swiftly bringing the Free Trade Agreement between the European Union and the Mercosur countries to a conclusion is a strategic priority for the entire European industry and, in particular, for Italy’s textile–clothing–fashion value chain,” the federation said in an emailed statement to WWD, adding that it is a key step in ensuring the sector’s growth amid a challenging macroeconomic situation.

In 2024, sales of the fashion and connected industries (including textiles, clothing, leather goods, footwear, jewelry, eyewear and cosmetics) were down 3.6 percent to 92.4 billion euros compared to 2024, according to data compiled by Italy’s Camera Nazionale della Moda Italiana. The loss of loyal customers as a result of higher prices and China’s declining appetite for European luxury goods are also among major concerns for the industry going forward.

“We are not speaking merely of an agreement with significant economic repercussions, but of an essential political step: a signal of confidence in Europe’s ability to act as a system and to pursue its own interests consistently after more than two decades of negotiations,” Confindustria Moda added.

Brazil’s Potential

In October, during São Paolo fashion week, Confindustria’s fashion accessories confederation traveled to Brazil with a delegation that included the national eyewear companies’ association Anfao, and leaders from Federlegno, the Italian wood supply chain. Together they outlined the potential of increased trade to the Brazilian market and vice versa.

“The trade agreement between the European Union and Mercosur represents a strategically important step for the fashion and accessories sector. Access to new markets can open up significant opportunities for our companies,” Giovanna Ceolini, president of Confindustria Fashion Accessories, told WWD in an emailed statement. Looking forward, Ceolini stressed the importance of a clear regulatory framework and effective tools capable of ensuring fair competition. “The companies we represent have been investing for years in sustainability, traceability, quality, and legality: fundamental values ​​that must be protected.”

In July, Federlegno, which represents the interest of luxury design firms, said in July that the deal would counterbalance the negative effects tariffs have had on Italian companies exporting to the U.S. under Trump’s trade policies.

In total, Italy exported 73.6 million euros of fashion accessories to Brazil in 2024. In the first five months of 2025, levels totaled 32 million euros.

Overall, the South American bloc accounted for 7.5 billion euros of Italian exports, according to Confindustria.

Looking Ahead

The European Commission has said that the main goal of the deal is to increase bilateral trade and investment, and lower tariff and non-tariff trade barriers — notably for small and medium-sized companies. The commission also said that the deal could save EU companies 4 billion euros’ worth of export duties a year.

According to the commission, the EU is Mercosur’s second-largest trading partner in goods, with exports totaling 57 billion euros in 2024. The EU accounts for a quarter of total Mercosur trade in services, with EU exports to the region amounting to 29 billion euros in 2023.  

The EU is also the biggest foreign investor in Mercosur, with a stock of 390 billion euros in 2023.

European Commission chief Ursula von der Leyen is scheduled to arrive in Brazil on Saturday to sign the agreement, which would create the world’s biggest free-trade area.