Editor’s Note
This article discusses the recently finalized trade agreement between India and the European Union, which aims to eliminate tariffs on over 90% of traded goods. The deal is expected to significantly boost EU exports to India and provide relief for key Indian export sectors.
India and the European Union have finalized a trade deal to remove tariffs on more than 90% of goods traded between the two.
The EU predicts the deal will mean it doubles exports to India by 2032.
The deal removed tariffs from some of India’s labour-intensive exports, which are hurting due to U.S. tariffs.
India and the European Union have finalized a trade deal that would remove or reduce tariffs on more than 90% of goods traded between the two.
The free trade agreement would see India reduce tariffs on European automobile and agricultural products, while the EU would do the same for Indian textiles, leather, marine products and gems and jewelry.
Many of these Indian exports have been affected by the U.S. imposing 50% tariffs.
The “historic” deal comes at a time when New Delhi is facing the brunt of U.S. tariffs and is looking at alternative markets for its exports.
India’s Commerce and Industry Minister Piyush Goyal said in a press conference on Tuesday that he expected the deal would come into force in 2026.
India is the EU’s ninth-largest trading partner, accounting for 2.4% of the bloc’s total trade in goods in 2024, far behind major partners like the U.S. (17.3%), China (14.6%), or the U.K. (10.1%). But the EU is one of India’s largest trading partners, rivaling the U.S. and China.
Von der Leyen called it the “mother of all deals.”
The deal would reduce India’s tariffs on European products by around 4 billion euros ($4.7 billion) a year, the European Commission said in a release.
The deal, which the EU expects will help it double its exports to India by 2032, will reduce tariffs on over 90% of European exports to India, such as autos, machinery, agri-food products, chemicals, and aircraft.
New Delhi has defied expectations of experts by offering to ease tariffs on sectors such as automotive and agriculture, which are particularly sensitive to the levies.
India plans to reduce tariffs on European cars “gradually” from 110% to 10% and abolish duties on car parts after five to ten years. Some major European automobile companies in India include Renault, Volkswagen, BMW, and Mercedes.
New Delhi has also nearly eliminated tariffs of up to 44% on machinery, 22% on chemicals and 11% on pharmaceuticals.
The deal has also reduced or removed high tariffs on agricultural products exported from Europe such as wine and olive oil. It also keeps European agricultural sectors beef, chicken meat, rice and sugar protected from imports from India.
In India, shares of major carmakers and alcoholic beverage companies plunged on the news of the deal.
Shares of Japanese carmaker Maruti Suzuki ended 1.5% down, while those of Korean company Hyundai Motor India closed 3.6% lower. Indian automotive companies Tata Motors and Mahindra & Mahindra ended 1.3% and 4.2% lower, respectively.
The Indian government has said the deal will give Indian consumers access to high-tech automobiles and greater competition.
Similarly, shares of India-based alcoholic beverage companies also fell. Shares of wine maker Sula Vineyards fell 4.1% while Heineken N.V.-owned United Breweries and Diageo-owned United Spirits fell over 2%.
The trade deal would lift levies on Indian sectors that have been hit by the 50% U.S. tariffs and provide New Delhi with “preferential access to the European markets” for more than 90% of its traded goods.
These goods from these “key labor-intensive sectors” account for $33 billion in exports. Before the deal, the EU tariffed them at rates of between 4% to 26%.
The EU-India trade deal could create six or seven million jobs in the textile sector alone, Goyal told Tuesday’s press conference, adding that the sector was the second-biggest employer in India after agriculture.
