The European Union and India have announced a landmark trade deal after nearly two decades of on-off talks, as both sides aim to deepen ties amid tensions with the US.
We did it, we delivered the mother of all deals, European Commission President Ursula von der Leyen said at a media briefing in Delhi. Indian Prime Minister Narendra Modi called the pact historic.
It will allow free trade of goods between the bloc of 27 European states and the world's most populous country, which together make up nearly 25% of global gross domestic product and a market of two billion people.
The deal will see a number of huge tariff cuts across a range of goods and services, and a joint security partnership. Von der Leyen and European Council President António Costa are in Delhi, where they met Modi at a bilateral summit.
The European Commission announced it would eliminate tariffs on most exports of chemicals, machinery and electrical equipment, as well as aircraft and spacecraft, following phased reductions. Significantly, duties on motor vehicles, currently as high as 110%, would be cut to 10% under a quota of 250,000 vehicles. That is six times larger than the 37,000-unit quota India granted to the UK in a deal signed last July.
India will also cut tariffs on wine, beer and olive oil from the EU. Brussels stated that the agreement would support investment flows, improve access to European markets, and deepen supply-chain integration. Delhi indicated that nearly all its exports would receive preferential access into the EU, with textiles, leather, marine products, handicrafts, gems, and jewelry expected to see tariff reductions or eliminations.
While commodities such as tea, coffee, spices, and processed foods will benefit from the agreement, Delhi has safeguarded sensitive sectors, including dairy, cereals, poultry, soy meal, certain fruits, and vegetables, balancing export growth with domestic priorities.
Delhi and Brussels agreed on a mobility framework that eases restrictions for professionals to travel between India and the EU in the short term. This is India's biggest free trade agreement, Modi said. It will make access to European markets easier for India's farmers and small businesses. It will also boost manufacturing and services sectors. It will foster innovative partnerships.
The trade deal comes as both India and the EU contend with economic and geopolitical pressure from the US. Delhi is grappling with 50% tariffs imposed by President Trump last year amid ongoing discussions aimed at a trade deal between India and the US that has been delayed.
Trump had previously threatened to escalate his trade war with European allies, though both von der Leyen and Costa emphasized that their partnership represents a cooperative response to global economic challenges. Von der Leyen noted, This is the tale of two giants - the world's second and fourth largest economies, which chose partnership in a true win-win fashion. A strong message that cooperation is the best answer to global challenges.
The deal is expected to revive labor-intensive sectors in India that were adversely impacted by US tariffs. However, analysts caution that compliance with EU regulations, particularly concerning environmental standards, may pose challenges for India's manufacturing sector. It is an opportunity more than a challenge, stated economist Mitali Nikore.
As the EU seeks to establish certainty during economic turbulence, the formal signing of the agreement is anticipated later this year after approval by the European Parliament and member states. Both sides are also progressing discussions on security and defense cooperation and climate action. Overall, this trade agreement is seen as a foundational step towards deeper economic integration, responding to the pressing global need for collaboration amidst geopolitical tensions.
