The European Union and India concluded a free-trade agreement after nearly two decades of negotiations, as both sides seek to deepen economic ties and offset the impact of Washington’s tariff policies.
The deal will reduce tariffs on Irish whiskey and certain food exports.
“We have concluded the mother of all deals,” European Commission president Ursula von der Leyen said on X on Tuesday. “We have created a free-trade zone of two billion people, with both sides set to benefit.” Von der Leyen and European Council President Antonio Costa are in New Delhi to mark the moment.
Indian prime minister Narendra Modi, who announced the conclusion earlier in the day, said the agreement would strengthen India’s manufacturing and services sectors while boosting investor confidence in Asia’s third-largest economy.
The deal is expected to double EU goods exports to India by 2032 by eliminating or reducing tariffs on 96.6 per cent of EU goods exports to India, according to a European Commission press release on Tuesday. These products range from automobiles and industrial goods to wine, chocolates and pasta. Meanwhile, the EU will eliminate or reduce tariffs on 99.5 per cent of goods imported from India over seven years, India’s Ministry of Commerce and Industry said.
The conclusion of negotiations after years of halting talks reflects the rapidly shifting global alignment under US President Donald Trump. The EU, despite long clashing with Indian officials over trade matters, is now focused on shedding its economic reliance on the US and China. India is similarly trying to shake its protectionist reputation and offset a 50 per cent Trump tariff, while at the same time balance its ties with Russia.
Nations are increasingly willing to “bury the hatchet” given the “atmosphere of uncertainty” around Trump’s policies, said Amitendu Palit, the research lead on trade and economics at the Institute of South Asian Studies.
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“Diversification is absolutely essential,” he added. “That is the name of the game.”
The deal is the most ambitious trade agreement India has signed. New Delhi has agreed to allow up to 250,000 European-made vehicles to enter the country at preferential duty rates – a quota more than six times larger than in its recent deals. It will also cut tariffs on premium European wine to 20 per cent from 150 per cent in a phased manner, according to a European Commission document.
The deal would also give India a competitive edge in exporting labour-intensive goods hit hard by Trump’s steep tariffs, including apparel, gems and jewellery and footwear. Brussels has also offered binding commitments on student mobility and post-study visas, along with concessions across 144 services sectors. India has kept dairy out of the deal.
The pact is expected to be formally signed after legal vetting, which will likely take around six months. The European Parliament will also have to ratify it.
The announcement comes weeks after India signed trade deals with New Zealand and Oman. Days earlier, the EU finally polished off a separate, long-gestating trade deal with the Mercosur bloc of South American countries – another pact meant to help the EU pivot away from the US and China. EU lawmakers have yet to ratify that deal, however.
Modi is similarly trying to find new markets for a country Trump once dubbed the “tariff king.” Tuesday’s agreement marked Modi’s fourth trade deal since last May, following pacts with the UK, Oman and New Zealand.
Next up, Modi is seeking partnerships with the Mercosur bloc, Chile, Peru and the Gulf Cooperation Council, hoping to secure strategic resources and increase India’s global footprint.
Bilateral trade between the EU and India stood at $136.5 billion (€114 billion) in India’s fiscal year through March 2025, with the EU making up more than 17 per cent of India’s total exports, official data showed. Conversely, India is the EU’s ninth largest trading partner.
The EU and India are also growing closer on the defence front, unveiling a new security partnership.
The agreement mostly offers a political signal – part of an EU effort to expand its alliances as Trump rattles the transatlantic bond. The EU has struck similar deals recently with countries like the UK and Canada.
The EU-India security partnership shows just how difficult these pacts can be. Negotiators ran into disagreements in the final moments over language about Russia’s invasion of Ukraine. Ultimately, they dropped any mention from the final text.
But while the partnership remains broad-brush, it offers promise on a few fronts.
The two sides vowed to tighten defence industry co-operation, which could give the EU better access to a market that currently buys lots of arms from Russia. Officials also opened the door to more maritime security co-operation and possible joint naval exercises. – Bloomberg