Global Trade and Tariffs

The historic India–EU free trade agreement, hailed by Ursula von der Leyen as the “mother of all deals” and by Prime Minister Modi as deepening ties between the two democracies, cuts Indian tariffs on imported EU autos from as high as 110% to 10%, reduces levies on EU wine, beer and olive oil, and opens easier EU market access for Indian farmers, small businesses and exporters in textiles, apparel, leather, footwear, gems and jewelry, handicrafts and engineering goods. Observers say the breakthrough — coming as EU–India trade (~$137 billion in 2024–25) now slightly exceeds U.S.–India trade (~$132 billion) — is accelerated by the unpredictability and cost of doing business with the U.S. under Trump’s tariffs and reflects a broader global rush to bilateral deals, including moves by the U.K. toward China.

India and the European Union announced in New Delhi on Jan. 27, 2026 that they have concluded a sweeping free‑trade agreement covering almost all goods and setting frameworks for defense, security and skilled‑worker mobility, a deal European Commission President Ursula von der Leyen called the "mother of all deals." The pact, which still requires legal scrub and European Parliament ratification, will eventually see India reduce or eliminate tariffs on 96.6% of EU exports and the EU reciprocate on nearly 99% of Indian exports by value, with quotas and phased cuts on politically sensitive items such as cars, wine and whisky. Officials say the accord links two markets representing about 25% of global GDP and one‑third of global trade, is expected to save EU exporters up to €4 billion ($4.7 billion) in annual tariffs, and will deepen joint manufacturing and supply‑chain integration across sectors from textiles and leather to autos, chemicals and pharmaceuticals. Both sides explicitly framed the breakthrough as propelled by President Donald Trump’s steep tariffs on Indian and European exports and his threats to penalize Europe over resistance to his Greenland ambitions, signaling a deliberate shift by major U.S. partners to hedge against Washington by deepening ties with each other. For U.S. firms, the deal creates a large, preferential India‑EU trade zone that could erode American exporters’ market share and bargaining power in both markets, while strengthening India and Europe’s ability to set trade and regulatory norms without U.S. input.