The recently concluded India-EU Free Trade Agreement (FTA) has been hailed as a landmark achievement, but it appears its impact extends beyond the economic realm, allegedly stirring unease in Washington, D.C.. According to a prominent European Council leader, the agreement expedited trade negotiations between India and the United States, suggesting that the prospect of a strengthened India-EU partnership prompted the U.S. to seek closer trade ties with Delhi.

Signed on January 27, 2026, after nearly two decades of negotiations, the India-EU FTA is a comprehensive pact designed to liberalize trade and investment between the two economies. The agreement encompasses phased commitments covering goods, services, and regulatory cooperation. Leaders from both sides have lauded the deal as the "mother of all deals," anticipating it will significantly boost economic opportunities for their respective populations.

The European Union projects that the FTA will double its exports to India by 2032 through the elimination or reduction of tariffs on 96.6% of traded goods. This is expected to result in savings of approximately four billion euros for European companies. India will also benefit from the agreement, with the EU set to cut tariffs on 99.5% of goods traded over seven years, including key exports like marine goods, leather, textiles, chemicals, and gems.

The agreement also addresses specific sectors. India is set to reduce tariffs on cars to 10% over five years, a significant drop from the previous rate of up to 110%. Tariffs on alcoholic beverages, including wines and spirits, will also see substantial reductions. For the EU, the pact includes tariff cuts on machinery, electrical equipment, chemicals, and iron and steel.

While economic factors laid the groundwork for the India-EU agreement, geopolitical considerations appear to have accelerated its completion. With India's economy on track to potentially surpass Japan as the world's third-largest, the EU sees the FTA as a way to secure access to India's vast market and diversify supply chains. For India, the deal supports its long-term economic vision and offers the chance to attract international investment and boost manufacturing.

The European Council leader's remarks suggest that the India-EU FTA also influenced trade dynamics between India and the United States. Faced with the prospect of a stronger India-EU trade alliance, the U.S. seemingly sought to expedite its own trade negotiations with India. On February 2, 2026, U.S. President Donald Trump announced a trade deal with India that would significantly lower U.S. tariffs on Indian goods. Specifically, a 50% US tariff on India would decrease to 18%.

While details of the U.S.-India agreement are still emerging, analysts suggest that it could serve as a confidence-building measure and help resolve existing trade tensions between the two countries. The agreement also provides the United States with greater access to the Indian market. It remains to be seen how the India-EU FTA and the U.S.-India trade deal will reshape global trade dynamics. However, these developments signal a shifting landscape where major economies are actively seeking new partnerships and re-evaluating existing alliances.