Landmark Europe-India Free Trade Deal

Written by Martin Lynch, European News Editor for IIR News Intelligence (Sugar Land, Texas)

Summary

The European Union (EU) and India have concluded a landmark free trade agreement that will greatly benefit key industrial sectors ranging from automobiles to chemicals and pharmaceuticals.

Historic Deal 

The European Union (EU) has signed its largest ever free trade agreement with India as it seeks to create new economic ties at a time of geopolitical unrest caused by China, Russia and the U.S..

The EU-India Free Trade Agreement (FTA) will impact many industrial sectors including machinery, cars, pharmaceuticals and chemicals among others. It comes after 18 years of on-off negotiations. The deal is expected to double EU goods exports to India by 2032 by eliminating or reducing tariffs in value for almost 97% of EU exports to the country. The tariff reductions will save businesses around 4 billion euro (US$4.7 billion) per year in duties on European products, according to the European Commission (EC). Today, the EU and India trade over 180 billion euro (US$212 billion) worth of goods and services per year, supporting close to 800,000 EU jobs. The agreement comes just weeks after the EU secured an historic free trade agreement with an alliance of key South American countries, the Mercosur Alliance. That deal will create a trading bloc made up of 31 countries and more than 700 million consumers. The EU and Mercosur account for up to 25% of global gross domestic product (GDP), and the deal will eliminate tariffs on more than 90% of bilateral trade. For additional information, see January 29, 2026, article--EU Signs Landmark South American Trade Deal. 

The Mother of All Deals

"We did it," said EC President Ursula von der Leyen. "We have delivered the mother of all deals. We are creating a market of 2 billion people. This is a tale of two giants -- the world's second and fourth-largest economies. Two giants who choose partnership, in a true win-win fashion. A strong message that cooperation is the best answer to global challenges. This trade deal will integrate further our supply chains and strengthen our joint manufacturing power. It will cut up to 4 billion euro (US$4.7 billion) in annual tariffs for exporters of all sizes. And it will create good jobs for millions of workers - here in India and in Europe."

India's Prime Minister Narendra Modi stated: "Today, India has concluded the largest free trade agreement in its history. Over the past few years, relations between India and the European Union have made remarkable progress. Based on shared democratic values, economic synergy, and strong people-to-people ties, our partnership is reaching new heights. Today, our bilateral trade stands at 180 billion euro (US$212 billion). More than 800,000 Indians are living and contributing actively in European Union countries. From strategic technologies to clean energy, from digital governance to development partnerships, we have opened new dimensions of cooperation in every sector. This historic agreement will make it easier for our farmers and our small industries to access European markets, create new opportunities in manufacturing, and further strengthen cooperation between our services sectors." 

Deal Highlights

The EC pointed out some key examples of how the deal will benefit different industries. For example, tariffs on cars will gradually go down from 110% to as low as 10%, while they will be fully abolished for car parts after five to 10 years. Tariffs ranging up to 44% on machinery, 22% on chemicals, 16.5% on plastics, 11% of aircraft and spacecraft, and 11% on pharmaceuticals will also be mostly eliminated. Tariffs currently sitting at up to 150% on wine, spirits and beer will be cut to between 20% and 50%. For India, the EU will remove all tariffs on 90% of Indian goods and within seven years, extend that to 93% of goods. Sectors that will benefit straight away will include marine/seafood products, chemicals, plastics and rubber, leather and footwear, textiles, base metals, gems and jewellery. 

Industry Reaction

One trade group wrote: "The European Automobile Manufacturers' Association (ACEA) welcomes the conclusion of negotiations for a free trade agreement (FTA) between the European Union and India. Running contrary to the global trend, this FTA is a strong statement of intent by both parties to furthering more open and mutually beneficial trade relations. It will greatly help European automobile exports enter a market of 4 million passenger cars that, until now, has been protected by prohibitively high import tariffs of up to 110%."

"It's an important deal for the simple reason that India trades a lot with the EU," Deepanshu Mohan, professor of economics at OP Jindal Global University near New Delhi, told Al Jazeera. "A lot of the trade happens in goods, merchandise which India would technically want to expand given its high tariffs with the U.S.. It gives a lot of possibilities for the EU as a region to expand its economic relationship with India. It's come quietly at a time when unilateralism has become ... a sort of cornerstone of trade negotiations."

Key Takeaways

• The European Union (EU) has signed its largest ever free trade agreement with India.
• It will create a free trade market of more than 2 billion people.
• EU and India trade over 180 billion euro (US$212 billion) worth of goods and services per year.

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