Amidst rising global trade tensions, particularly those spurred by former U.S. President Donald Trump's tariff policies, the European Union (EU) and India have finalized a landmark free trade agreement. The deal, which has been dubbed the "mother of all deals", is expected to have a significant impact on the economies of both regions, covering a market of over 2 billion people.
Negotiations for the EU-India trade agreement, which began in 2007, had previously stalled due to disagreements over market access for automobiles, agricultural products, and dairy. However, discussions resumed in 2022 and gained considerable momentum over the last six months, driven in part by concerns over protectionist trade measures and a desire to diversify supply chains. Trump's administration had imposed steep tariffs on both India and the EU, disrupting established trade flows and pushing them to seek alternative partnerships. In 2025, Trump imposed 25% tariffs on India for buying Russian oil and then doubled it to 50% months later. Furthermore, six EU nations were threatened with higher tariffs over objections to Trump's attempts to take over Greenland.
The agreement is one of the most comprehensive that India has ever signed. Indian Prime Minister Narendra Modi emphasized the deal represents about a third of global trade. "This agreement has brought massive opportunities for 1.4 billion Indians and millions of people in European countries," he stated, highlighting the "wonderful example of synergy between two of the world's major economies". European Commission President Ursula von der Leyen echoed this sentiment, stating that the accord signifies a partnership between "two giants" who "chose partnership, in a true win-win fashion".
Under the terms of the agreement, India will significantly reduce tariffs on various EU goods, including machinery, electrical equipment, chemicals, and iron and steel. Notably, tariffs on cars will be slashed to 10% over five years, a substantial reduction from the previous rates as high as 110%. The EU will reciprocate by reducing trade barriers to Indian exports. The EU anticipates that its goods exports to India will double by 2032. The EU is keen to stress that the EU and India already trade over €180bn worth of goods and services per year, supporting close to 800,000 EU jobs.
In addition to the trade agreement, the EU and India are also set to deepen cooperation on security matters. This includes a security pact to enhance joint efforts on maritime security, countering hybrid threats, and combating terrorism. Furthermore, a labor mobility agreement aims to create opportunities for skilled workers and students in both regions.
The formal signing of the agreement is expected to take place later in the year, with implementation anticipated by early next year. Once in effect, the deal is projected to cut up to 4 billion euros ($4.7 billion) in annual tariffs for exporters and generate millions of jobs in both India and Europe. The agreement is expected to further integrate supply chains and strengthen joint manufacturing capabilities.
