The EU Commission sealed a free-trade agreement with India on Tuesday cutting tariffs on EU goods while excluding agriculture to appease Indian authorities. Europe’s car industry is set to be among the biggest beneficiaries of the agreement, hailed as the 'mother of all deals'.
After months of intense negotiations, the European Commission concluded on Tuesday a free-trade deal with India which sharply reduces tariffs on EU products from cars to wine as the world looks for alternative markets following President Donald Trump's tariffs.
The announcement was made during a high-level visit by European Union leaders including Commission President Ursula von der Leyen. Both countries hailed a "new chapter in strategic relations" as both sides seek alternatives to the US market.
India is currently facing tariffs of 50% from the Trump administration, which has severely dented its exports. After sealing the Mercosur deal with Latin American countries earlier this month, the EU has said it aims to speed up its trade agenda with new partners.
Talks went down to the wire with negotiators meeting over the weekend and in the early hours of Monday. The deal says it will bolster the "untapped" potential of their combined markets but did not include politically sensitive sectors such as agriculture.
Von der Leyen's powerful trade chief Maroš Šefčovič, who is in charge of negotiating on behalf of the 27 EU member states, said Brussels aims for a fast implementation by 2027.
In an interview with Euronews from New Delhi after the deal was announced, Šefčovič said the India deal showcases the EU's new approach when it comes to trade: getting more pragmatic on deliverables, rather than getting stuck on political red lines.
A win for European exports looking to tap Indian market
Under the agreement, the EU aims to double goods exports to India by 2032 by cutting tariffs on approximately 96% of EU exports to the country, saving around €4 billion a year in duties. At its full potential, the deal creates a market of 2 billion people.
Europe’s carmakers emerge as clear winners, with Indian customs duties gradually reduced from 110% to 10% if the terms are applied. Tariffs in sectors including machinery, chemicals and pharmaceuticals will also be almost entirely eliminated.
Wine and spirits - key exports for countries like France, Italy and Spain - will see duties reduced from 150% to around 20 to 30%. Olive oil duties will be cut to zero from 40%.
After years of tensions with EU farmers, the Commission said sensitive agricultural products had been excluded from the agreement, leaving out beef, chicken, rice and sugar.
When it comes to India, the agreement keeps trade terms on dairy and grain untouched in line with the demands of the Indian authorities, which saw it as a red line.
The Commission said it included a dedicated sustainable development chapter “which enhances environmental protection and addresses climate change.”
The agreement does not cover geographical indications, another contentious area for negotiators, which will be addressed in a separate deal aimed at protecting EU products from imitation on the Indian market.
Deal cut under pressure from Trump's tariffs
The timing of the deal is important as the two sides look to de-risk their economies from the threat of Trump's tariffs.
The EU saw tariffs triple to 15% last year under a contentious deal and India is currently operating under a 50% tariff regime from Washington.
The Trump administration slapped an additional 25% duty on India last year as punishment for buying Russian oil, which India has defended citing a need for cheap energy to power a country of 1.4 billion people.
Talks between the EU and India first began in 2007 but quickly ran into hurdles.
Negotiations were relaunched in 2022 and talks intensified last year as the two sought to cushion the impact of Trump's return to the White House.
After the deal was signed during a two-day trip on Tuesday, in which the chiefs of the European Commission and the Council were guests of honour, the EU said the deal shows that "rules-based cooperation" remains the preferred path for the bloc - as well as for a growing number of partners from Latin America to India.
Before the deal can be implemented, the European Council and the European Parliament will have to ratify it, which can become an arduous process.
The Commission hopes to begin implementing the agreement from January 2027.
