India, EU Seal Landmark Free Trade Deal Covering a Third of Global Trade
Long-negotiated accord slashes tariffs, deepens strategic ties as both sides hedge against U.S. trade pressure.
ERBIL (Kurdistan24) — India and the European Union on Tuesday reached a sweeping free trade agreement after nearly two decades of negotiations, forging one of the world’s largest commercial pacts and signaling a strategic realignment amid mounting U.S. trade pressure on both economies.
The accord, which the head of the EU’s executive branch hailed as the “mother of all deals,” will liberalize trade on nearly all goods between India and the EU’s 27 member states, from textiles and engineering products to medicines, automobiles, and wine.
Once implemented—likely after several months of legal review and ratification—it could affect nearly 2 billion people.
“This agreement will bring major opportunities for the people of India and Europe,” Indian Prime Minister Narendra Modi said in a virtual address. “It represents 25% of global GDP and one-third of global trade.”
Beyond commerce, the two sides also agreed on a framework for deeper defense and security cooperation, alongside a separate pact to ease mobility for skilled workers and students—underscoring a partnership that extends well beyond trade.
U.S. pressure accelerates talks
Momentum for the deal intensified as U.S. President Donald Trump imposed steep tariffs on both India and the EU, disrupting global trade flows and prompting major economies to seek alternative partnerships.
Trump’s confrontational trade tactics, including threats against European allies and heightened pressure on New Delhi, injected urgency into long-stalled negotiations.
Speaking in New Delhi alongside European Commission President Ursula von der Leyen and European Council President António Costa, Modi said the partnership would “strengthen stability in the international system” at a time of “turmoil in the global order.”
“Europe and India are making history today,” von der Leyen said, calling the accord a “true win-win” that sends “a strong message that cooperation is the best answer to global challenges.”
Tariff cuts and sectoral gains
Under the agreement, India will reduce or eliminate tariffs on 96.6% of EU exports, while Brussels will phase in cuts covering nearly 99% of Indian shipments by trade value, according to official statements. The deal is expected to cut up to €4 billion ($4.7 billion) in annual tariffs, further integrate supply chains and generate millions of jobs.
India’s export-oriented sectors—including textiles, apparel, engineering goods, leather, handicrafts, footwear and marine products—are poised to benefit. The EU stands to gain in wine, automobiles, chemicals and pharmaceuticals.
A quota system will gradually reduce India’s steep duties on automobiles, wines and whisky. Tariffs on EU-made cars will fall from 110% to as low as 10%, while duties on car parts will be eliminated within five to ten years. Indian tariffs of up to 44% on machinery, 22% on chemicals and 11% on pharmaceuticals will also be largely scrapped. Duties on premium European wine will drop from 150% to 20%.
Both sides carved out sensitive sectors. India excluded dairy products and cereals, citing domestic concerns, while the EU denied concessional access for Indian sugar, meat, poultry and beef.
Strategic hedging
India is seeking to diversify exports to offset the impact of U.S. tariffs, including an additional 25% levy tied to its continued purchases of discounted Russian oil—bringing total U.S. duties on Indian goods to 50%. For the EU, the pact offers deeper access to one of the world’s fastest-growing major economies and reduces reliance on more volatile markets.
“This is the most comprehensive trade deal India has ever signed,” said Garima Mohan, a senior fellow at the German Marshall Fund, noting it gives European firms a first-mover advantage in India.
Bilateral trade stood at $136.5 billion in 2024–2025, with both sides targeting $200 billion by 2030.
“Ultimately, the agreement is about creating a stable commercial corridor between two major markets at a time the global trading system is fragmenting,” said Indian trade analyst Ajay Srivastava.
For Brussels, the deal also reflects a broader push for “strategic autonomy” as ties with Washington strain. Over the past year, the EU has accelerated outreach to partners from Japan and Indonesia to Mexico and South America—signaling a recalibration of global trade alliances in an increasingly uncertain order.