Doha: Qatar National Bank (QNB) expects the trade agreement between the Southern Common Market (Mercosur) and the European Union to yield significant economic gains for both sides, while also strengthening initiatives aimed at countering protectionism. According to Qatar News Agency, in its weekly commentary, QNB highlighted the changing landscape of global trade dynamics. Last year, the global economic outlook deteriorated significantly due to geopolitical uncertainties and major policy shocks, notably the US administration's imposition of sweeping tariffs. These tariffs, centered on a 10 percent baseline levy on imports, were a massive negative shock for trade, as the US, which accounts for 26 percent of the global economy, had previously maintained an average tariff rate of less than 2 percent. This shift raised fears of supply-chain disruptions and escalating trade wars. However, the expected widespread tariff wars did not materialize as predicted. The rest of the world, in contrast, has been moving tow ards deeper trade integration. Major economies continue to view trade as essential to their growth models, actively pursuing new or deeper trade agreements. The long-delayed European Union-Mercosur trade deal is one such initiative, returning to focus after 25 years of negotiations. Despite initially facing resistance due to agricultural market access and environmental governance issues, shifting strategic priorities have increased pressure on the EU to accelerate trade integration. European Commission President Ursula von der Leyen signed the agreement last month with the Mercosur bloc, comprising Argentina, Brazil, Paraguay, and Uruguay. This deal aims to create one of the largest free trade areas globally, involving 31 countries and accounting for close to 21 percent of global GDP. Despite its potential, the deal faces obstacles, including referral to the EU Court of Justice (EUCJ) by a narrow majority in the Parliament. The EUCJ's decision could take up to two years, but a provisional application of the treaty by the European Commission is possible in the interim. The QNB commentary emphasizes the considerable economic gains expected from the agreement. It outlines a gradual elimination of tariffs on around 92 percent of bilateral trade, with transition periods extending up to 15 years for sensitive products. The bank notes that the trade volume gains are especially significant for Mercosur, as current bilateral trade in goods and services represents less than 1 percent of total combined GDP, indicating a substantial margin for growth. For Mercosur, the agreement promises better access to the EU's large and high-income market, supporting agricultural and manufacturing exports. For the EU, it means expanded access to Mercosur's large consumer market, reduced trade costs, and increased access to natural resources. The deal is also seen as a geopolitical win amid competition with China and the US. In terms of investment, QNB projects growth, particularly for Mercosur, where EU firms already account for a sig nificant portion of foreign direct investment (FDI). The new agreement is expected to boost EU FDI stock by 10-20 percent over the next decade, potentially increasing GDP by over 0.6 percent. For the EU, opportunities in renewable energies and critical raw materials align with its industrial strategies. QNB concludes that the Mercosur-EU trade agreement offers substantial potential economic gains and challenges the narrative of increased protectionism. The anticipated GDP gains, driven by trade and investment flows, are expected to be more pronounced for Mercosur, while the EU benefits from improved market access, investment opportunities, and supply chain diversification.