The European Union and India announced a historic trade deal after nearly two decades of on-and-off negotiations, as both sides aim to deepen ties amid tensions with the United States.
“We have concluded the mother of all agreements,” European Commission President Ursula von der Leyen said on X after meeting Indian Prime Minister Narendra Modi in Delhi. He called the deal “historic.”
It will allow free trade in goods between the bloc of 27 European states and the world’s most populous country, which together represent nearly 25% of global gross domestic product and a market of two billion people.
The deal is expected to significantly reduce tariffs and expand market access for both sides.
Von der Leyen and European Council President António Costa are in Delhi, where they met Modi at a bilateral summit.
The European Commission said the deal would eliminate tariffs on most exports of chemicals, machinery and electrical equipment, as well as aircraft and spacecraft, after gradual reductions. Importantly, motor vehicle duties, which currently stand at 110%, would be reduced to 10% under a quota of 250,000 vehicles.
The agreement aims to reduce costs of European products entering India, such as cars, machinery and agricultural products, after import duties are reduced. Sensitive agricultural sectors, notably dairy and sugar, have been excluded.
Brussels said the deal would support investment flows, improve access to European markets and deepen supply chain integration.
“This is a historic agreement,” Modi said. “This will facilitate access to European markets for Indian farmers and small businesses. It will also boost the manufacturing and service sectors. It will stimulate innovative partnerships.”
The deal comes as India and the EU face economic and geopolitical pressure from the United States.
Delhi is grappling with 50% tariffs imposed by President Donald Trump last year, amid negotiations for a trade deal between India and the United States that are still dragging on.
Last week, Trump threatened to escalate his trade war with his European allies for opposing a U.S. takeover of Greenland. to move back.
This broader geopolitical context was evident in recent statements made by leaders.
On Tuesday, von der Leyen wrote: “We have created a free trade zone of two billion people, from which both sides should benefit. This is only the beginning. We will develop our strategic relationship to be even stronger.”
A day earlier, Costa had saidwithout naming the United States, that the trade deal would send an “important political message to the world that India and the EU believe more in trade deals than in tariffs” at a time when protectionism is on the rise and “some countries have decided to increase tariffs.”
Von der Leyen and Costa arrived in Delhi over the weekend and were the chief guests at India’s colorful Republic Day celebrations on Monday.
On Tuesday, the leaders posed for photos with Modi, the bonhomie between them evident.
The official signing will probably not take place until later this year, after the agreement has been approved by the European Parliament and the European Council.
Alongside the trade deal, India and the European Union are also holding separate negotiations on security and defense cooperation, as well as climate action.
On Tuesday, Indian Defense Minister Rajnath Singh said he discussed a range of bilateral security and defense issues with European Commission Vice-President Kaja Kallas, including opportunities to integrate supply chains to build reliable defense ecosystems and develop future-ready capabilities.
Reuters news agency reported that the two sides were working on a proposed security and defense partnership covering areas such as maritime security, cyber threats and defense dialogue.
“This is a perfect example of partnership between two major economies of the world… This agreement represents 25% of global GDP and one-third of global trade,” Modi said while inaugurating the India Energy Week conference on Tuesday.
The EU is India’s largest trading partner for goods, with bilateral trade in goods reaching $136 billion (£99.4 billion) in 2024-25, almost doubling in a decade.
Negotiations for a deal between India and the EU began in 2007, but were stalled in 2013 due to market access barriers and regulatory requirements. Discussions were formally resumed in July 2022.
The main sticking points were access to India’s auto market, agricultural products and carbon-related tariffs – and analysts will read the fine print to see what the final deal says on these issues.
Officials from both sides have been working hard in recent days to finalize the outstanding chapters of the deal, aiming to conclude it before the European leaders’ visit.
The deal comes as pressure increases on Delhi and Brussels to secure alternative markets for exporters.
Over the past seven months, India has signed major trade deals with the UNITED KINGDOMOman and New Zealand, and a 2024 deal signed with the four-nation European Free Trade Association bloc of Switzerland, Norway, Iceland and Liechtenstein came into force.
The EU, for its part, signed a trade agreement with the South American trade bloc Mercosur earlier this month, after 25 years of negotiations.
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