Free trade despite everything: Narendra Modi (center) with EU Commission President Ursula von der Leyen and EU Council President Antonio Costa in Delhi. (January 27, 2026)Image: IMAGO / ANI News
analysis
India and the European Union enter into a free trade agreement that covers a market of 2 billion people. It is a conscious sign of partnership in a time of confrontation.
January 27, 2026, 9:01 p.mJanuary 27, 2026, 9:01 p.m
Remo Hess, Brussels / ch media
In the chaos of tariffs and new trade conflicts, the European Union has achieved a remarkable success: On Thursday, EU Commission President Ursula von der Leyen and Indian Prime Minister Narendra Modi announced the agreement on a free trade agreement in Delhi in the presence of EU Council President Antonio Costa.
“This agreement will open up great opportunities for the people of India and Europe,” Modi said in a speech. Von der Leyen spoke of “the mother of all deals” that was concluded here. A swipe at the self-proclaimed “deal maker” in the White House? For sure.
Cooperation still works
In fact, the scale of the free trade agreement is enormous. India is the most populous country in the world and one of the fastest growing markets. Together with Europe, a free trade zone of almost two billion consumers will be created.
The conclusion of the deal is notable because India traditionally seals off its market with high tariffs. That’s why US President Donald Trump imposed a punitive tariff of 50 percent on him, one of the highest of all Trump tariffs worldwide.
Now the EU has managed to gain access to this isolated market. And without a crowbar like Trump, but only with negotiations on equal terms. This sign that partnership is worth more than brute customs force is the big signal that this agreement should send. “Daddy Trump,” as NATO Secretary General Mark Rutte called him, is said to look enviously at the “mother of all deals.”
The EU and India have been working on the agreement for almost 20 years. Now that the agreement is in place, joint trade is expected to double in the next few years, according to forecasts from Brussels. EU companies should save four billion euros in tariffs.
Above all, industry, such as German car manufacturers, can have hope. After losing the Chinese market, India could become an alternative. This is true even if the reduced tariff rate from 110 percent to 10 percent only applies to a quota of 250,000 cars.
But mechanical engineers, chemical and pharmaceutical companies also benefit from the reduction in tariffs on over 90 percent of all goods exports. And there is even something in it for agriculture: for wine and spirits, tariffs are gradually falling from 150 percent to 20 and 40 percent, respectively. Customs duties will be completely abolished for processed products such as olive oil, pasta or chocolate.
There were no negotiations in areas sensitive to both sides, such as beef or chicken.
What concessions has Brussels made?
Of course the EU also had to give something. Among other things, the export of steel, clothing and medicine was important to Delhi in the negotiations.
These product groups are of course not without problems for Europe. After all, India is already the second largest steel producer in the world after China, and the EU is struggling with global overproduction. Because of the glut of cheap steel, it recently imposed protective tariffs that affect Switzerland as well as India.
In the area of clothing, the EU is actually trying to get away from so-called “fast fashion”, i.e. cheap, disposable fashion. It also wants to build international supply chains without violating EU labor rights and EU environmental standards. Now India gets zero tariffs on its clothing exports.
It was initially unclear to what extent medications were also affected. But India already has a very strong position here, so some in Europe fear a cluster risk.
The concessions that Brussels has made in these areas could therefore still be worth talking about. In order for the agreement to come into force, the EU states and the EU Parliament still have to agree.
However, the latter has increasingly become a difficult partner. Just last week, the EU parliamentarians decided to send the free trade agreement with the South American Mercosur countries into a long additional legal loop.
This deal, which was only concluded “thanks” to Trump and his tariff policy, is hated by European farmers because of the partial opening of the market for South American agricultural products. In general, one would like to say that the trend among the population is towards less, rather than more, free trade.
But in times of new global world disorder, trade policy is always geopolitics. This is made clear not least by the fact that the EU and India signed an agreement on security and defense partnership in Delhi on Friday in addition to the trade deal.
This will certainly not have gone unnoticed in Moscow, where relations with India have always been good. (aargauerzeitung.ch)