NEW DELHI (AP) — After nearly 20 years of talks, India and the European Union have finally struck a free trade agreement. This deal, which one EU leader called the “mother of all deals,” could impact around 2 billion people.
As trade ties deepen, both India and the EU find themselves looking for new partnerships. The U.S. has started imposing steep tariffs that disrupt established trade, pushing these major economies closer together.
Prime Minister Narendra Modi emphasized that this agreement brings great benefits for both regions. “We represent 25% of global GDP and one-third of all trade,” he noted. Under this pact, almost all goods—from textiles to medicine—will trade freely between the EU’s 27 member states and India. European wine and cars, in particular, will see significant cuts in import taxes.
The agreement also expands cooperation beyond trade to areas like defense and worker mobility. This signals that the partnership is about more than just economics.
Trade Deal Motivations
The recent push for this deal came in part from U.S. President Trump’s trade strategies, which included tariffs that have strained U.S.-EU relations. Modi stated that strengthening ties with the EU is essential for stability in today’s uncertain global landscape.
Ursula von der Leyen, the EU Commission President, called this partnership a significant step. She highlighted that cooperation is crucial for overcoming global challenges.
Tariffs and Regulatory Changes
A formal signing might happen later this year, with expectations for the deal to take effect soon after. India will slash tariffs on 96.6% of EU exports, while the EU will gradually reduce tariffs on 99% of India’s goods. Key areas in India expected to benefit include textiles and footwear, while the EU focuses on wine and automobiles.
For example, tariffs on EU cars are set to drop from 110% to 10% over a few years. Additionally, Indian tariffs on premium wine will decrease from a steep 150% to 20%.
However, some items like dairy products and certain meats have been left out of the agreement due to domestic concerns.
Global Trade Landscape
This deal not only aims to strengthen ties between India and the EU but also serves as a counterbalance to higher U.S. tariffs on Indian goods, which have surged due to geopolitical tensions. For the EU, accessing India’s rapidly growing economy offers much-needed diversity in trade routes.
In 2024-2025, trade between India and the EU reached $136.5 billion, with hopes to boost that to $200 billion by 2030. Ajay Srivastava, an Indian trade expert, noted that this agreement creates a stable trading corridor amid a fragmented global market.
As Europe seeks to diversify its partnerships, it has been forming agreements with countries like Japan and Indonesia. This shift reflects a growing sentiment among European leaders to lessen reliance on the U.S., seen by many as unpredictable.
For further reading on global trade dynamics, check out this EU Trade Report.
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