After nearly 20 years of talks, India and the European Union have finally initialled what both sides call the “largest free-trade agreement in history.”

       At the 16th India-EU summit in New Delhi on 27 January the two sides put pen to paper. Negotiators were still haggling over details on 26 January, but with global geopolitics and trade tensions rising, both decided to compromise in search of greater stability and room for co-operation.

       The pact will make European goods far more competitive in India: peak tariffs on EU cars shipped to India will fall from 110 % to just 10 %, while Brussels will scrap or cut duties on 99.5 % of Indian exports over seven years.

       Prime Minister Narendra Modi said Indian textiles, jewellery, leather goods and services would all benefit.

       Lin Minwang, vice dean of Fudan University’s Institute of International Studies, argues that President Trump’s trade policy gave the talks “the final kick.” India walked away from RCEP at the last minute, but this time Washington’s tariffs pushed New Delhi and Brussels together.

 “Mother of all deals” 

       On 26 January India held its Republic Day parade, complete with a “animal column” of camels and ponies. In the VIP stand sat European Commission President Ursula von der Leyen and European Council President António Costa—foreign leaders invited as chief guests, a reliable barometer of Indian diplomacy.

       The next day the FTA was unveiled. Covering roughly two billion people, Modi said the deal spans about 25 % of global GDP and one third of world trade. Von der Leyen and Costa both called it the “largest trade agreement ever.”

       Negotiations began in 2007 but were shelved for nine years over cars, farm goods and dairy. They restarted in 2022 and accelerated in the past six months as U.S. tariffs and global trade turmoil mounted.

       The EU is India’s largest trading partner; India ranks ninth for the EU. Two-way goods trade hit €120 billion in 2024, 11.5 % of India’s total.

Under the accord India will open its market to key European products:

• Wine tariffs drop from 150 % to 75 % and eventually to about 20 %

• Olive-oil duties phased out over five years (45 % → 0)

• Machinery, chemicals and pharmaceuticals also see deep cuts

       Cars were the hardest fight. India gave the EU an annual quota of 250,000 vehicles; in-quota tariffs fall from 110 % to 10 %—a big win for German automakers eyeing a market forecast to reach six million units a year by 2030. (Sales now stand at about 4.4 million, with European brands holding less than 4 %.)

Electric vehicles are shielded for five years; dairy is excluded altogether to protect Indian farmers.

       The deal must still be ratified by India’s federal cabinet and the European Parliament. Indian commerce minister Piyush Goyal hopes it can enter into force this year.

       It is India’s fourth major trade pact since the Trump administration slapped punitive tariffs on Indian goods, following agreements with the UK, Oman and New Zealand. The EU has also recently signed or concluded deals with Indonesia, Mexico, Switzerland and the South American Mercosur bloc.

       The IMF expects India to become the world’s fourth-largest economy this year, and New Delhi targets a top-three spot by 2030.

       Alongside the trade pact, India and the EU on 27 January signed a security-and-defence partnership covering AI, space and other emerging technologies.

   The U.S. factor   

       British media argue that without Trump’s tariff threats India and the EU might never have mustered the courage to close the deal. Yet because EU-India economic ties are still relatively thin, the immediate economic impact will be modest; the real value lies in long-term co-operation.

       Under Trump’s idiosyncratic trade policy, “middle-power” countries are increasingly forming trade blocs to shield themselves from geopolitical shocks rather than relying on a single global economic pillar.

       German Finance Minister Jörg Kukies welcomed the accord, saying Europe is “consciously focusing on openness, reliability and strong partnerships” in turbulent times.

       Von der Leyen noted that the world’s second- and fourth-largest economies had “chosen co-operation in a true win-win way,” sending “a powerful signal that co-operation is the best answer to global challenges.” Council President Costa was blunter: the deal sends “an important political signal that India and the EU believe in trade agreements, not tariff weapons.”

       In August 2025 Washington imposed punitive tariffs on Indian goods, pushing the overall U.S. rate on Indian products to 50 % and hammering labour-intensive sectors such as textiles, handicrafts, garments, gems and leather. The EU deal offers these industries an alternative market.

       U.S. Trade Representative Jamieson Greer said other countries are “scrambling to find outlets for excess capacity” because the Trump administration is charging entry fees. The EU, highly dependent on trade, is turning to India.

       Yet the United States remains India’s largest export market and New Delhi still prizes access to it. In 2025 India and the U.S. held intense trade talks that ultimately collapsed. India’s embassy in Washington has now hired a U.S. lobbying firm led by former Trump adviser Jason Miller to help revive negotiations.

Even inside the U.S. Republican Party the India trade file is contentious. A leaked audio clip caught Senator Ted Cruz telling supporters he is “battling the White House” to push a U.S.-India deal past opposition from Trump, Vice-President Vance and trade adviser Navarro.

       For now, India has chosen the EU as its trade partner of first resort—and the agreement is being hailed on both sides as proof that middle powers can still write the rules of global commerce.