Indian Prime Minister Narendra Modi (center) welcomes European Council President Antonio Costa (left) and European Commission President Ursula von der Leyen on Tuesday before their meeting in New Delhi, India.
Manish Swarup/AP
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Manish Swarup/AP
NEW DELHI — India and the European Union have reached a free trade agreement aimed at strengthening their economic and strategic ties, officials announced Tuesday, after nearly two decades of negotiations.
This agreement, which the head of the European executive described as “the mother of all agreements”, could affect up to 2 billion people. It will likely be several months before the agreement comes into force.
The deal between two of the world’s biggest markets comes as Washington targets both the Asian powerhouse and the European bloc with high import duties, disrupting established trade flows and pushing major economies to seek other partnerships.
“This agreement will bring major opportunities to the people of India and Europe,” Indian Prime Minister Narendra Modi said in a virtual speech to an energy conference. “This represents 25% of global GDP and a third of global trade.”
The deal provides for free trade in almost all goods between the 27 EU members and India, covering everything from textiles to medicines, and reducing high import taxes on European wine and cars.
India and the EU also agreed on a framework for deeper defense and security cooperation, as well as a separate pact to facilitate the mobility of skilled workers and students, signaling that their partnership extends beyond trade.
US pressure propels India-EU trade deal
Negotiations on the India-EU deal gained new momentum after US President Donald Trump’s heavy-handed trade tactics, including threatening his European allies with punitive tariffs over their objections to Trump’s threats to take control of Greenland.
Speaking at a joint news conference in New Delhi with European Commission President Ursula von der Leyen and European Council President António Costa, the Indian leader said the partnership with the EU “will strengthen the stability of the international system” at a time of “turbulence in the global order.”
Modi, speaking at a joint press conference in New Delhi with European Commission President Ursula von der Leyen and European Council President António Costa, said the partnership with the EU “will strengthen the stability of the international system” at a time of “turbulence in the global order”.
“Europe and India are making history today. We have concluded the mother of all deals,” von der Leyen posted on X.
In a speech later, she said the deal was a story of “two giants” choosing a partnership “in a truly win-win way.” She also said it sends “a strong message that cooperation is the best response to global challenges.”
The deal is expected to further integrate supply chains and strengthen shared manufacturing strength between the two economies. It will also cut annual tariffs for exporters by up to 4 billion euros ($4.7 billion) and create jobs for millions of workers in India and Europe.
Relax regulations
A formal signing of the deal could take place later this year, once officials review the legal details of the text and the European Parliament ratifies it. Indian Commerce Minister Piyush Goyal said he hoped the deal would come into force by the end of the year.
India is expected to reduce or eliminate tariffs on 96.6% of EU exports, while Brussels will respond with similar step-by-step reductions that will eventually cover almost 99% of Indian shipments by commercial value, according to statements from both sides.
Indian sectors likely to benefit from the deal include textiles, clothing, engineering goods, as well as leather, handicrafts, footwear and marine products, while EU gains will include wine, automobiles, chemicals and pharmaceuticals, among others.
A quota system for automobiles, wine and whiskey was agreed, reducing high customs duties.
The European Commission said India’s tariffs on EU-made cars would gradually decline from 110% to 10%, while they would be completely abolished on auto parts after five to 10 years. Customs duties of up to 44% on machinery, 22% on chemicals and 11% on pharmaceuticals will also be largely eliminated.
On European wine, customs duties in India would drop from 150% to 20% for high-end wines.
New Delhi excluded dairy products such as milk and cheese, as well as cereals, from the deal, citing “national sensitivities” regarding these products. For its part, the EU will not allow concessional tariffs on imports of Indian sugar, meat, poultry and cattle products, Indian commerce ministry officials said.
Compensating impact of the increase in US customs tariffs
India is seeking to diversify its export destinations as part of a strategy to offset the impact of rising US tariffs, including an additional 25% levy on Indian goods for its relentless purchases of discounted Russian oil, bringing the combined tariffs imposed by the US on its Asian ally to 50%.
For the EU, the deal gives the bloc expanded access to one of the world’s fastest-growing major economies and helps European exporters and investors reduce their dependence on more volatile markets.
“This is the most comprehensive trade deal India has ever signed, giving European companies a leading edge in this market and giving them a strategic advantage that other players do not have,” said Garima Mohan, senior fellow at the German Marshall Fund.
Trade between India and the EU stood at $136.5 billion between 2024 and 2025. Both sides hope to increase this to around $200 billion by 2030, Indian officials said.
“Ultimately, the agreement aims to create a stable trade corridor between two major markets at a time when the global trading system is fragmenting,” said Indian trade analyst Ajay Srivastava.
The EU is still reeling from the aggressive approach of its once loyal ally across the Atlantic. There is a widespread sense of betrayal across the bloc due to Trump’s onslaught of higher tariffs, embrace of far-right parties and belligerence toward Greenland, a semi-autonomous territory of EU member Denmark.
Brussels has accelerated its presence in markets around the world. Over the past year, von der Leyen has signed agreements with Japan, Indonesia, Mexico and South America under the slogan “strategic autonomy”, which in practice amounts to a decoupling from the United States seen by most European leaders as irregular.
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