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The leaders of the European Union and India announced a wide-ranging trade deal on Tuesday, reached after nearly two decades of on-and-off negotiations that became increasingly urgent over the past six months after US President Donald Trump imposed tough tariffs.
Indian Prime Minister Narendra Modi and Ursula von der Leyen, president of the European Commission, called it the “mother of all agreements.”
Modi also highlighted that the trade agreement is the largest and most comprehensive that India has ever signed, accounting for a third of all global trade.
The free trade agreement reduces tariffs on almost 97% of the value of European goods imported into India, and is expected to double EU exports to the South Asian country by 2032.
“We are creating a market of two billion people,” von der Leyen said when announcing the deal.
“This is the story of two giants, the second and fourth largest economies in the world. Two giants choosing a truly win-win partnership.”
India and the European Union have reached a long-delayed trade deal that would cut tariffs on most products, aiming to boost bilateral trade and reduce dependence on the United States.
The announcement of the historic agreement follows India’s annual Republic Day military parade ceremony, during which von der Leyen and European Council President António Costa were welcomed as guests of honor. It is an event that Indian leaders often use to hint at their strategic priorities.
Opening India’s protected domestic market
The deal will eliminate India’s historically high trade barriers and open its closely watched domestic market to many products, including European cars.
Customs duties on cars imported from Europe by automakers such as Volkswagen, Renault and Mercedes-Benz will be reduced to 10 percent, from the current 110 percent on some vehicles.
India also agreed to reduce tariffs on European wine, chocolates and olive oil. and other products.
For its part, New Delhi will benefit from the removal of tariffs on textiles, leather, gems, jewelry and other goods entering the EU, and the deal promises easier access for highly skilled Indian professionals wanting to work in Europe – a major win for the country’s workforce.
Von der Leyen said the agreement was “a strong message that cooperation is the best response to global challenges” and that it would “reduce strategic dependencies at a time when trade is increasingly militarized.”
Negotiations following Trump’s tariffs and the war in Ukraine
The global challenge facing many countries is the Trump administration’s erratic trade policies, which have only accelerated negotiations between European leaders and New Delhi.
“This momentum that we’ve seen is all due to President Trump,” said Praveen Donthi, senior India analyst at the International Crisis Group think tank.
Indian exports to the United States were hit with a 50 percent tariff in August, half of which Trump said was punishment for the country’s purchase of cheaper Russian crude oil after Moscow invaded Ukraine.
The EU, meanwhile, negotiated a lower tariff rate of 15 percent last year, but a group of European nations were threatened with new tariffs after opposing the US president’s attempts to seize Greenland.
India has recently welcomed a series of foreign leaders who are looking to that country to diversify its trade ties in the face of growing threats from the United States – including Canadian politicians, despite two years of strained relations that have frozen trade talks.
Minister of Foreign Affairs Anita Anand was in Delhi and Mumbai last October, and Prime Minister Mark Carney is I am planning to visit India in the coming months to try to sign agreements on uranium, energy and minerals.
British Columbia Premier David Eby briefs India on domestic gas and liquid mineral exports during his week-long trade visit, as the two countries recover from a diplomatic crisis sparked by Canada accusing India of involvement in the murder of a prominent Sikh activist from British Columbia.
According to Donthi, free trade negotiations between the EU and India, which began in 2007 but then failed before resuming in 2022, were hampered because Europe was slow to realize the country’s growing importance in the global economy. But everything changed after Russia invaded Ukraine.
“They realized that India and Russia are great friends,” Donthi added, and they wanted to know how to “get India involved.” [their] side.”
It is worth noting that the wide-ranging agreement reached on Tuesday does not include sticking points such as better access to India’s agricultural and dairy sector – a further indication that both sides were keen to reach a deal quickly.
Modi’s government was also under pressure to release good trade news domestically, Donthi said, after negotiations between India and the United States failed last fall.
“This is New Delhi’s way of sending a message to its own supporters and also to the world at large: we are going to diversify. We are not going to depend on a huge country, even if it is the most powerful country in the world.”
Officials said the formal signing of the agreement would take place later this year and, after extensive legal review, could come into force in early 2027.
