India and EU finalize 'mother of all deals' amid U.S. tariff pressure
NEW DELHI — India and the European Union have finalized a landmark free trade agreement, described as the "mother of all deals," after nearly two decades of negotiations. The pact aims to deepen economic and strategic ties between the two regions, covering nearly 2 billion people and one-third of global trade.
Immediate Action & Core Facts
The agreement will eliminate or reduce tariffs on more than 96% of traded goods by value, saving European companies up to €4 billion ($4.75 billion) annually in duties. Key sectors affected include automobiles, textiles, pharmaceuticals, and agricultural products.
Indian Prime Minister Narendra Modi and European Commission President Ursula von der Leyen announced the deal, emphasizing its significance in stabilizing global trade amid U.S. tariff pressures.
Deeper Dive & Context
Key Provisions of the Deal
The agreement includes:
- Automobiles: India will reduce tariffs on European cars from 110% to 10% over five years, with a 250,000-car quota benefiting manufacturers like Volkswagen and Mercedes-Benz.
- Wine and Spirits: Tariffs on European wines will drop from 150% to 20% gradually, while spirits will see tariffs reduced to 40%.
- Pharmaceuticals and Machinery: All tariffs on these goods will be removed.
- Indian Exports: EU tariffs on Indian textiles, leather, marine products, and gems will be eliminated.
Geopolitical Motivations
The deal was accelerated by U.S. President Donald Trump's aggressive trade tactics, including imposing 50% tariffs on Indian goods and threatening European allies with punitive measures. The EU and India sought to hedge against U.S. unpredictability, with the EU signing similar deals with Mercosur and other partners.
Indian officials emphasized the deal's role in strengthening stability amid "turmoil in the global order." The U.S. has not yet publicly reacted, though Treasury Secretary Scott Bessent criticized the EU for proceeding with the agreement.
Economic Impact
The pact is expected to double EU exports to India by 2032 and create a free trade zone encompassing 25% of global GDP. India, the world's most populous country, is also one of the fastest-growing economies, with projections to become the fourth-largest economy this year.
The deal includes frameworks for deeper defense and security cooperation, as well as eased mobility for skilled workers and students, signaling a broader partnership beyond commerce.
Ongoing U.S.-India Trade Talks
Despite the EU deal, India continues negotiations with the U.S., with Indian Petroleum Minister Hardeep Singh Puri stating that a U.S.-India trade agreement is at a "very advanced stage." He emphasized India's support for a multilateral trading system, benefiting both the EU and U.S.
The U.S. has maintained punitive tariffs on both India and the EU, with India facing a 50% levy partly due to its oil purchases from Russia. The EU-India deal is seen as a strategic response to these trade pressures.