In the space of a week, India reached a historic trade deal with the EU and paved the way for a second deal with the United States.
In response to repeated disruptions of global trade deals by US President Donald Trump, as well as China’s growing influence, the India-European Union Free Trade Agreement signals a strategic realignment aimed at seeking alternative markets and diversification to protect economies from the impact of abrupt policy shifts. Nearly two decades in the making, the deal brings together the 27 EU states and Indian markets – which represent two billion people and 25% of global GDP. Signed on January 27, the agreement This is the biggest deal ever concluded by the EU or India.
“We have concluded the mother of all deals,” European Commission President Ursula von der Leyen said in a statement. press briefing in New Delhi. “This will reduce up to €4 billion (£3.5 billion) in annual tariffs for exporters of all sizes and create good jobs for millions of workers in India as well as Europe,” she said. From a European perspective, the agreement allows for diversification away from China and the United States. For India, this provides secure access to the world’s largest single market. “We have sent a signal to the world that rules-based cooperation always yields excellent results,” von der Leyen said.
The EU and India already trade more than €180 billion worth of goods and services per year, affecting almost 800,000 jobs in the EU. The deal is expected to double EU goods exports to India by 2032.
Lower the barriers
The focus is on eliminating tariffs and trade barriers. For example, India will remove tariffs of up to 44% on machinery, 22% on chemicals and 11% on pharmaceuticals. When the agreement comes into force after its ratification in Europe, the EU will eliminate customs duties on more than 90% of imported products, or 91% in terms of value; while India will eliminate customs duties on 86% of products and 93% in terms of value.
As the US continues to tighten visa rules for Indians, the EU and India have also signed a Comprehensive Mobility Cooperation Framework – a pact aimed at facilitating the movement of Indian students, researchers and professionals across the 27 EU states. “The deal will reduce strategic dependencies, bringing together Indian skills, services and scale with European technology, capital and innovation,” von der Leyen said.
The EU is also exploring India’s participation in Horizon Europe, the world’s largest public research programme. “I look forward to getting the best talent working to advance health, clean energy and cutting-edge technology, and we will create innovation hubs between India and the EU.” This will help researchers and startups collaborate on next-generation technology,” von der Leyen said. India and the EU have hailed the agreements as beneficial to both sides.
Steps towards an agreement with the United States
At the same time, on February 2, President Trump published on his Truth Social platform that the US and India had also “reached a trade deal”. Official details were revealed on February 7 when the two governments jointly announced they had “reached a framework for an interim agreement” on trade.
Last year, Trump imposed high and broad tariffs on India – a 25% “reciprocal” tariff, supposedly in response to Indian tariffs and non-tariff trade barriers on US goods, as well as a 25% penalty for purchasing Russian oil – which led to a precipitous fall in Indo-US trade.
Under the proposed framework, the United States would lower reciprocal tariffs from 25% to 18%. In return, India would work to reduce tariffs and non-tariff barriers against the United States to zero. India also agreed to buy $500 billion worth of U.S. energy products, aircraft and aircraft parts, precious metals, technology products and coking coal over the next five years, as well as increase trade in other sectors.
While Trump’s Truth Social message included an Indian commitment to stop buying Russian oil and buy more from the United States and Venezuela, no such commitment appeared in the official announcement.
In contrast to the enthusiastic and positive reception given to the European deal, the US deal was heavily criticized by Indian opposition parties, who called it a capitulation by Prime Minister Narendra Modi and a betrayal of legitimate Indian interests.
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