The European Union (EU) and India have reached a historic trade deal substantially reducing trade barriers amid growing volatility in international trade driven largely by Washington’s tariff diplomacy under President Donald Trump.
The new deal allows free trade of goods between the 27 EU states, and India- the world’s most populous country. Combined, the two blocks account for a quarter of global GDP and a two-billion-people market.
The deal is expected to double EU exports to India by 2032 by eliminating or reducing tariffs in 96.6 percent of traded goods by value, and will lead to savings of USD 4.75 billion in duties for European companies.
The EU will cut tariffs on 99.5 percent of goods imported from India over seven years, with tariffs to be cut to zero on Indian marine goods, leather and textile products, chemicals, rubber, base metals and gems and jewelry, India’s trade ministry said in a statement.
Per the phased reductions, the EU eliminates tariffs on most export goods mainly in chemicals, electrical equipment, machinery, aircraft and spacecraft, among others. Particularly, duties on motor vehicles, currently as high as 110 percent, would be cut to 10 percent under a quota of 250,000 vehicles.
That is six times larger than the 37,000-unit quota India granted to the UK in a deal signed last July.
India will also cut tariffs on wine, beer, and olive oil from the EU. Brussels said the agreement would support investment flows, improve access to European markets, and deepen supply-chain integration.
Delhi said almost all of its exports would get “preferential access” into the EU, with textiles, leather, marine products, handicrafts, gems and jewelry set to see a reduction or elimination of tariffs.
“We did it, we delivered the mother of all deals,” European Commission President Ursula von der Leyen said at a media briefing in Delhi. Indian Prime Minister Narendra Modi called the pact “historic.”
India and the EU said agriculture-related items like soya, beef, sugar, rice and dairy have been kept out of the purview of the trade deal.
The two-decade-long EU–India trade talks gained momentum after Washington imposed a 50 percent tariff on some Indian goods, and as US allies pushed back against President Donald Trump’s tariff threats and his bid to take over Greenland.
Canada’s Prime Minister Mark Carney, in a speech that got a standing ovation in Davos last week, urged middle powers to come together to avoid becoming victimized. The Canadian PM also plans to visit India to sign deals on uranium, energy and minerals, after striking a deal recently with China.
Before signing the deal with New Delhi, the EU agreed a pact with the South American bloc Mercosur, following deals last year with Indonesia, Mexico and Switzerland. During the same period, New Delhi finalized pacts with Britain, New Zealand and Oman.
