U.S. President Donald Trump and Indian Prime Minister Narendra Modi in Washington, DC, February 13, 2025.
Andrew Caballero-Reynolds | Afp | Getty Images
The ink is barely dry on the landmark trade deal between the European Union and India, but all eyes are now on how President Donald Trump will respond to the free trade agreement that is widely seen as a strategic hedge against volatile trade policies and tariff threats from the United States.
The agreementwhich was confirmed earlier on Tuesday, took almost two decades to agree and will see the trading giants gradually reduce prices to zero on the majority of their respective imports, except for certain key products and sectors.
Trump has yet to publicly react to the EU-India deal, announced early Tuesday morning European time, but he and the White House are unlikely to be happy with the deal. Treasury Secretary Scott Bessent has previously criticized the EU for striking a trade deal with India.
“The United States has made much greater sacrifices than the Europeans. We imposed 25 percent tariffs on India for purchasing Russian oil. Guess what happened last week? The Europeans signed a trade deal with India,” Bessent told ABC News on Sunday.
Indian Minister of Petroleum and Natural Gas Hardeep Singh Puri told CNBC on Tuesday that he expects US-India relations to remain positive and a trade deal to be reached soon.
“The structure of the relationship (between the United States and India) is very strong. I would try to look at the positive side, I’m not a guesser, I don’t know when the trade deals will be signed, how long it will take… but everyone needs to relax a little.” Hardeep Singh Puri told CNBC’s Amitoj Singh.
India supports the multilateral trading system, he said, and that is clear from the latest agreement with the EU: “If you were to state that the multilateral trading system, the global economy, is facing challenges, then I don’t think anyone would want to dispute that assessment. On the Indian side, several sectors are looking at an improved European market,” he said.
How will Trump react?
Indian Prime Minister Narendra Modi earlier hailed the “historic” free trade deal, while he and European Commission President Ursula von der Leyen called it the “mother of all deals.” Von der Leyen said the agreement would allow both sides to develop their strategic relations.
The two leaders are due to speak at an EU-India summit on Tuesday and are expected to welcome a deal that includes easing trade barriers and reducing tariffs at a time when their export-oriented industries face punitive taxes from the United States.
The White House imposed 15% tariffs on EU imports last year. despite agreeing on a trade deal with the bloc, while goods from India were hit with a more punitive 50% tax, partly because of its continued oil purchases from Russia.
Hosuk Lee-Makiyama, director of the European Center for International Political Economy, said the EU-India trade deal is one of the best deals available for both sides, who have historically been protectionist when it comes to strategic sectors of their economies, such as agriculture and automobiles.
“This is a deal that they can make that will have a positive impact, while the U.S. and China will remain closed as more markets open up. So in that respect, it’s probably one of the best deals they can make right now,” Lee-Makiyama told CNBC on Tuesday.
Both India and the EU have reasons to move forward with a deal, despite the inevitable anger it could trigger in Washington, he added.
“But there is a significant difference (with this historic deal), which is that India failed to close the deal with the United States,” while “EU trade ministers are now getting used to the fact that there is a new tariff threat coming from Washington every week, and of course their skin gets a little thicker (each time),” he told CNBC’s “Europe Early Edition.”
Balancing act
There will undoubtedly be some wariness in Europe about antagonizing the United States at a time when its commitment to its European allies appears very vulnerable, particularly with regard to the principle of collective defense which is a central tenet of the NATO military alliance.
David McAllister, member of the European Parliament and chairman of its Foreign Affairs Committee, summarized the balance that the region must maintain between pursuing its own economic interests and maintaining good relations with Washington.
“Europe must become more sovereign. Europe must grow, and that means we must become more economically competitive,” he told CNBC’s “Europe Early Edition” on Tuesday.
“We need to do much more for our own security and defense, but we also want to maintain close transatlantic relations with the United States… but these relations must be based on mutual respect and trust,” he said.
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