India and EU clinch the ‘mother of all deals’ in a historic free trade agreement

Indian PM Modi (center) welcomes European Council President Antonio Costa (left) and European Commission President
Ursula von der Leyen before their meeting in New Delhi, yesterday
[AP Photo]

After nearly two decades of negotiations, India and the European Union announced yesterday they have reached a free trade agreement to deepen economic and strategic ties. The accord — dubbed the “mother of all deals” — could impact as many as 2 billion people.

The deal is also one of the biggest bilateral engagements on commerce and comes as Washington targets both India and the EU with steep import tariffs.

“This agreement will bring major opportunities for the people of India and Europe,” India’s Prime Minister Narendra Modi said in a virtual address to an energy conference. “It represents 25% of the global GDP and one-third of global trade.”

India and the EU also agreed on a framework agreement for deeper defense and security cooperation, and a separate pact aimed at easing mobility for skilled workers and students, signaling their partnership extends beyond commerce.

Speaking at a joint news conference in New Delhi with European Commission President Ursula von der Leyen and European Council President António Costa, the Indian leader said the partnership with the EU “will strengthen stability in the international system” at a time of “turmoil in the global order.”

Washington is targeting both India and the EU with steep tariffs, disrupting established trade flows and pushing major economies to seek alternate partnerships.

The negotiations for the India-EU deal got a new impetus after U.S. President Donald Trump’s strong-arm tactics over tariffs and Greenland.

“Europe and India are making history today. We have concluded the mother of all deals,” von der Leyen said in a post on X.

In a speech later, she said the accord was a tale of “two giants” — the world’s second and fourth largest economies — “who chose partnership, in a true win-win fashion.” She also said it sends “a strong message that cooperation is the best answer to global challenges.”

The deal, further integrating supply chains and strengthening joint manufacturing power, will also cut up to 4 billion euros ($4.7 billion) in annual tariffs for exporters and create jobs for millions of workers in India and in Europe.

A formal signing of the deal could come later this year after a legal scrubbing of the text while it is expected to go into effect sometime early next year, after ratification by the EU Parliament.

India is expected to reduce or eliminate tariffs for 96.6% of EU exports, while Brussels will reciprocate with similar reduction covering nearly 99% of India’s shipments by trade value in a phased manner, according to statements from both sides.

India’s sectors poised to gain from the deal include textiles, apparel, engineering goods, leather, handicraft, footwear and marine products while the EU’s gains will be in wine, automobiles, chemicals and pharmaceuticals, among others.

A quota system for automobiles, wines and whisky has been agreed on, bringing down steep duties.

The European Commission said tariffs charged by India on cars will gradually go down from 110% to as low as 10%, while they will be fully abolished for car parts after 5-10 years. Tariffs ranging up to 44% on machinery, 22% on chemicals and 11% on pharmaceuticals will also be mostly eliminated, it added.

On European wine, the tariffs in India would come down from 150% to 20% for the premium range.

New Delhi has excluded from the deal dairy products such as milk and cheese along with cereals citing “domestic sensitivities” about those products. The EU for its part won’t allow concessional tariffs on imports of Indian sugar, meat, poultry and beef products, officials at Indian Trade Ministry said.

India is looking to diversify its export destinations as part of a strategy to offset the impact of higher U.S. tariffs, including an extra 25% levy on Indian goods for its unabated purchases of discounted Russian oil, bringing the combined tariffs imposed by the United States on its Asian ally to 50%.

For the EU, the deal offers the bloc expanded access to one of the world’s fastest-growing major economies, and helps European exporters and investors reduce their reliance on more volatile markets.

Bilateral trade between India and EU stood at $136.5 billion in 2024-25. The two sides hope to increase that to about $200 billion by 2030, Indian officials said.

“Ultimately, the agreement is about creating a stable commercial corridor between two major markets at a time the global trading system is fragmenting,” said Indian trade analyst Ajay Srivastava. RAJESH ROY & SAM McNEIL, NEW DELHI, MDT/AP