The recently concluded EU-India free trade agreement stands out for its scale and ambition. Described as the “mother of all deals” by European Commission President Ursula von der Leyen, the deal comes as India overtook Japan as the world’s fourth-largest economy.
Bilateral trade in goods and services between the EU and India is already worth 180 billion euros (£155 billion). The agreement aims to double EU exports to India by 2032 and create a free trade zone representing around a quarter of the world’s population (nearly two billion people). This would also cover around 25% of global GDP.
At this point in history, the global multilateral trading system is threatened customs duties and geopolitical tensions. But this agreement clearly shows that the era of free trade is not over.
Rather, it shows how countries are adapting to new global realities to liberalize trade (i.e. remove barriers). Instead of moving away from free trade, countries are becoming selective and seeking bilateral agreements with strategic partners. United Kingdom signed its own trade agreement with India in July 2025.
Read more: UK’s trade deal with India offers greater access to booming economy – and could make food imports cheaper
Traditionally, a free trade agreement has a set of rules for how two or more countries should treat each other when importing, exporting, investing, or doing other business together.
But viewing the EU-India trade deal from a classic free trade perspective would be misleading. Trade deals in the 1990s and early 2000s, such as NAFTA and the EU, were primarily based on tariff reductions and efficiency gains. The EU-India deal, on the other hand, was shaped by changing geopolitical pressures and concerns about resilience in the face of trade shocks or other crises.
Long in the making
Trade negotiations between the EU and India began in 2007, but the negotiations gained momentum in 2025, in a context of renewed tariff threats from the United States under the second administration of Donald Trump.
This has worsened trade imbalances between the EU and China due to Beijing’s desire to be more self-reliant and use export controls. It has also raised concerns about the resilience of global supply chains. THE EU-India Trade and Technology Council was created in 2023, modeled on the EU-US framework, and highlights how modern trade agreements can bring together economic, technological and strategic objectives.
At a time when global trade is becoming increasingly protectionist and where geopolitical rivalry growing, this agreement provides an opportunity to recalibrate commercial alignment. It is also an opportunity to reshape commercial architecture while building supply chain resilience across Asia, Europe and the Atlantic.
For the EU, the agreement constitutes a central pillar of its diversification strategy. There was an urgent need for the bloc to reach an agreement with India to be less dependent on China, its main trading partner.
In 2024more than 21% of EU imports came from China. Meanwhile, China purchased just 8.3% of the bloc’s exports. For the EU, this translated into an investment of €304 billion (£264 billion) trade deficit with China.
The EU-India agreement therefore provides an opportunity for the EU to reduce its excessive dependence on China. It is also an opportunity to eliminate some of the risks linked to its supply chains and secure access to Indian markets. rapidly growing consumer market. This should provide European companies with growth opportunities in Asia at a time when EU domestic demand is sluggish and stagnant.
The deal will also make it easier for European companies to find suppliers and build alternative production bases when supply chains are threatened. India’s situation in the Indo-Pacific is of strategic interest to the EU due to growing interdependence and the importance of maritime supply chains. It also makes India a key partner against uncertainty surrounding the bloc’s future relationship with the United States.
For India, the agreement guarantees market access for Indian companies at a time of growing trade uncertainty – particularly after its relations with the United States deteriorated following Trump’s decision. threat of 500% tariffs.
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The EU-India agreement eliminate tariffs on textiles and clothing, and when it comes into effect, it will provide Indian clothing producers with a reliable trading partner. The deal will allow European brands, such as Zara and H&M, to diversify away from China and into Indian manufacturing hubs. It is estimated that costs could be lower as the deal will allow clothing to benefit from zero customs duty.
THE pharmaceutical sector also offers an opportunity for India. Although EU tariffs are already low, the deal aims to simplify regulations and put in place stronger intellectual property frameworks. This could integrate Indian generic drug producers into European healthcare supply chains.
The scope of the agreement extends well beyond goods, services and investments. Cooperation projects on clean energy aligns Europe Green Deal (the bloc’s framework for reaching net zero) with India’s target of producing 500 gigawatts of renewable capacity by 2030. This should pave the way for joint leadership in solar, wind, grids and green hydrogen.
The EU-India deal marks neither a return to the free trade orthodoxy of an earlier era nor the end of free trade in today’s fractured world order. Rather, it shows how trade has become a tool for achieving geopolitical goals. The agreement also shows that countries are opening their markets – selectively and after careful deliberation. Trade agreements are evolving: they are increasingly shaped not only by considerations of market access, but also by economic security.
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