U.S. President Donald Trump and Indian Prime Minister Narendra Modi meet in the Oval Office of the White House on February 13, 2025 in Washington, DC.
Andrew Harnik | Getty Images News | Getty Images
India and the European Union on Tuesday announced a “groundbreaking” free trade agreement that will eliminate or reduce tariffs on more than 90% of goods traded between the two countries.
The deal, nearly two decades in the making, will see India lower tariffs in two of its most politically sensitive sectors: agriculture and automobiles. The agreement also lands amid a wave of expansion in bilateral trade agreements as countries readjust supply chains and trade relationships in response to the U.S. government’s increasingly aggressive enforcement of tariffs.
The far-reaching changes are already visible. Earlier this month, Canadian Prime Minister Mark Carney visited China for the first time in 17 years, aiming to expand economic ties with the world’s second-largest economy. British Prime Minister Keir Starmer is also scheduled to make a three-day visit to China, making him the first British prime minister to do so since 2018.
Yet the memorable India-EU deal, which European Commission President Ursula von der Leyen called the “mother of all agreements”, has yet to overcome its most unpredictable hurdle: US President Donald Trump.
President Trump has imposed punitive tariffs on both friend and foe, but has not yet considered an agreement between India and the EU. His silence is remarkable.
In August last year, the United States imposed high tariffs on Indian goods because of India’s oil purchases from Russia, days after imposing 25% tariffs on New Delhi.
Trump’s recent comments on the EU, including threats related to Greenland, have escalated, with his response casting a permanent cloud over the “historic” agreement. And that cloud darkened even further when U.S. Treasury Secretary Scott Bessent criticized the EU’s trade deal with India in an interview with ABC News on Sunday.
But perhaps all is not doom and gloom, and the United States and India are at a “very advanced stage” of reaching a long-awaited deal, Indian Oil and Natural Gas Minister Hardeep Singh Puri told CNBC on Tuesday.
Another cloud weighing on investors’ minds is the US Federal Reserve concluding its policy meeting on Wednesday. While interest rates are widely expected to remain unchanged, Powell’s comments will be closely analyzed amid renewed political pressure on the central bank.
What you need to know today
Will a trade deal between the US and India materialize? Indian Oil and Natural Gas Minister Hardeep Singh Puri told CNBC on Tuesday that the two countries are at a “very advanced stage” of finalizing the agreement.
The S&P 500 closed at an all-time high. In the U.S. on Tuesday, benchmarks hit intraday highs on a rally in Big Tech stocks ahead of major gains for companies in the sector. The Nasdaq Composite also rose, but the Dow Jones Industrial Average fell. European stock markets ended higher following the announcement of the EU-India trade deal.
Partial shutdown of the US government. That appeared to be a possibility as of early Saturday, largely because Senate Democrats strongly oppose funding for the Department of Homeland Security and other agencies in the wake of the second recent killing of American citizens by federal agents in Minneapolis.
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And finally…
Indian Prime Minister Narendra Modi (C) poses for a photo with European Commission President Ursula von der Leyen (R) and European Council President Antonio Costa on January 27, 2026 in New Delhi, India.
Sajjad Hussain | AFP | Getty Images
Under the India-EU Free Trade Agreement, India will reduce tariffs on European cars and agricultural products, while the EU will also reduce tariffs on Indian textiles, leather, seafood, and gems and jewellery.
India is the EU’s ninth largest trading partner, accounting for 2.4% of the EU’s total trade in goods in 2024, far behind major partners such as the US (17.3%), China (14.6%) and the UK (10.1%). However, the EU is one of India’s largest trading partners, rivaling the US and China.
— Priyanka Salve
