Allies Speed EU–India and EU–Mercosur Trade Deals to Hedge Against Trump Tariffs and Greenland, EV Disputes
Facing repeated tariff threats from the Trump administration — including disputes over Greenland and electric-vehicle tariffs — EU trading partners moved to speed long-stalled megadeals like EU–India and EU–Mercosur to diversify away from U.S. exposure. The EU–India pact cuts Indian tariffs on EU autos from as high as 110% to 10% and opens EU markets for Indian farmers, textiles and other exporters, with EU–India trade now about $137 billion versus roughly $132 billion with the U.S., and experts say these agreements were accelerated as governments also reduce reliance on U.S. tech services and dollar assets.
📌 Key Facts
- Allies accelerated bilateral trade deals to hedge against U.S. tariff unpredictability under President Trump, who has used threats of punishing tariffs to extract concessions and recently threatened measures over issues including Greenland and electric vehicles.
- Former IMF chief economist Maurice Obstfeld and other analysts say long‑stalled mega‑deals such as EU–India (nearly two decades in the making) and EU–Mercosur (roughly 25 years) were pushed over the finish line in part because partners wanted faster diversification away from reliance on the U.S. market.
- The EU–India agreement includes steep tariff cuts: Indian tariffs on imported EU autos will fall from as high as 110% to 10%, and tariffs on EU wine, beer and olive oil will be reduced.
- The EU–India deal also opens EU markets to a wide range of Indian producers — farmers, small businesses and exporters of textiles, apparel, leather, footwear, gems and jewelry, handicrafts and engineering goods — improving market access across multiple sectors.
- EU–India trade in 2024–25 was about $137 billion, now slightly exceeding U.S.–India trade of roughly $132 billion, underscoring shifting trade patterns that helped motivate the deal.
- Political leaders framed the breakthrough as historic: European Commission President Ursula von der Leyen called the FTA the “mother of all deals,” and Prime Minister Narendra Modi said it deepens ties between the “world’s two largest democracies,” with leaders implicitly linking the timing to U.S. tariff volatility.
- Beyond trade pacts, some European governments and institutions are actively reducing reliance on U.S. digital services (e.g., Zoom, Microsoft Teams), while central banks and global investors have been diversifying away from dollars and U.S. Treasuries by buying gold and trimming dollar exposure.
- U.S. reactions to these shifts include warnings that declines in foreign Treasury holdings create vulnerabilities (per former Trump domestic‑policy official Paul Winfree) and official insistence from the White House (spokesman Kush Desai) that the Trump administration remains committed to the dollar’s reserve‑currency role.
- The push for alternative partnerships is broader than the EU deals alone: the coverage notes other moves such as U.K. Prime Minister Keir Starmer’s trip to Beijing seeking a “strategic and consistent” relationship with China as part of a wider realignment.
📰 Source Timeline (3)
Follow how coverage of this story developed over time
February 03, 2026
2:21 PM
Seeking shelter from Trump's fury, U.S. trade partners reach deals with each other
New information:
- Spells out that after Trump used threats of punishing tariffs to force 'lopsided' deals with the EU, Japan, South Korea and others, he has repeatedly come back with new tariff threats—including on eight European countries over opposition to his Greenland push and 100% tariffs on Canada over Chinese EVs—convincing partners that any U.S. deal offers little real protection.
- Details that some European governments and institutions are actively reducing reliance on U.S. digital services such as Zoom and Microsoft Teams, while central banks and global investors are 'dumping dollars and buying gold' to diversify away from the dollar and Treasuries.
- Adds reaction from former Trump domestic‑policy official Paul Winfree, who warns that relative declines in foreign Treasury holdings expose a U.S. vulnerability rivals would like to exploit, and from White House spokesman Kush Desai, who insists Trump remains committed to the dollar’s reserve‑currency role.
- Provides broader expert framing from former IMF chief economist Maurice Obstfeld that long‑stalled mega‑deals like EU–India (nearly two decades) and EU–Mercosur (roughly 25 years) were pushed over the finish line in part because Trump’s tariff pressure made partners more eager to accelerate pro‑diversification agreements.
January 28, 2026
5:32 PM
Are Trump's tariffs fueling a boom in trade deals for China and India?
New information:
- Detailed tariff cuts: Indian tariffs on imported EU autos will drop from as high as 110% to 10%, alongside cuts on EU wine, beer and olive oil.
- Sector specifics: India touts easier EU market access for its farmers, small businesses and exporters of textiles, apparel, leather, footwear, gems and jewelry, handicrafts and engineering goods.
- Comparative trade data: EU–India trade in 2024–25 is about $137 billion, now slightly exceeding U.S.–India trade of roughly $132 billion.
- Political framing: Ursula von der Leyen publicly calls the FTA the “mother of all deals,” and Modi emphasizes it deepens ties between the “world’s two largest democracies,” while leaders implicitly link the breakthrough to Trump’s tariff unpredictability.
- Context on broader realignment: The article situates the deal within a wider global rush to bilateral agreements as doing business with the U.S. becomes more expensive and less predictable under Trump’s tariff regime, and notes U.K. Prime Minister Keir Starmer’s trip to Beijing to seek a 'strategic and consistent' relationship with China.
January 27, 2026