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The European Union and India agreed on Tuesday to a free trade agreement, the largest ever for both sides, in a bid to counter the erratic trade policies of the United States, its main trading partner.
“We have done it. We have delivered the mother of all agreements,” European Commission President Ursula von der Leyen, the top EU official, told reporters in New Delhi.
The agreement strengthens economic and political ties between the 27-nation bloc and the world’s fourth-largest economy and “underlines their joint commitment to economic openness and rules-based trade at a time of heightened geopolitical tensions and global economic challenges,” the commission said in a statement.
“We have sent a signal to the world that rules-based cooperation can still achieve great results,” von der Leyen said in a statement.
Most recently, U.S. President Donald Trump threatened to impose higher tariffs on European countries that opposed Denmark’s push to annex Greenland, but later walked back the threat. For the EU as a whole, the US is the largest export market.
And in August, President Trump announced an additional 25% tariff on India, building on the previously announced 25% tariff rate, as punishment for Russian oil and gas imports.
The EU and India already trade more than 180 billion euros ($215 billion) in goods and services annually. Merchandise trade between the two countries has nearly doubled in the past decade.
Negotiations on the trade deal, which began in 2007, will resume in 2022 after a long hiatus, and von der Leyen last week emphasized her commitment to the deal, speaking of the need to build a “new form of European independence.” Speaking in Davos, Switzerland, he said such independence was necessary as a result of current geopolitical shocks and that Europe preferred “fair trade to tariffs.”
Tuesday’s announcement follows a recent trade agreement between the EU and South American trading bloc Mercosur.
India also signed trade agreements with various countries in 2025, a year marked by President Trump’s return to the White House and confusing trade policy.
According to the European Commission, the EU-India agreement is expected to double exports of EU goods to India by 2032 due to the elimination or reduction of customs duties.
As part of the deal’s many provisions, India’s tariffs on European cars will be phased down from 110% to 10%, and tariffs on machinery, chemicals and medicines from Europe will be largely eliminated.
India’s tariffs on EU-produced wine will also be halved, initially from 150% to 75% and eventually to 20%, while tariffs on European olive oil will go from 45% to zero over five years.
India’s Ministry of Commerce said in a statement that the EU will also reduce tariffs on Indian goods, benefiting labor-intensive sectors such as textiles, tea, spices, gems and jewellery.
Daniel Krall, senior economist at advisory firm Oxford Economics, said the deal “has huge symbolic importance in a world of rising protectionism” and is unlikely to significantly boost the economies of the EU and India.
The agreement will need to go through various legal formalities before it can take effect.
