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EU and India finalize landmark trade agreement
After nearly two decades of intermittent negotiations, the European Union and India announced a sweeping trade deal on Tuesday, aiming to strengthen economic ties amid rising global trade tensions. The agreement, described as a breakthrough by leaders, will eliminate tariffs on a wide range of goods and create a market of two billion people.
Key details of the agreement
The pact will phase out tariffs on most exports, including chemicals, machinery, electrical equipment, aircraft, and spacecraft. Notably, duties on motor vehicles-currently as high as 110%-will be reduced to 10% under a quota of 250,000 vehicles, six times larger than the quota India granted the UK in a separate deal last year.
The European Commission stated the agreement would boost investment flows, improve market access, and deepen supply-chain integration. India, in turn, will gain preferential access to the EU for nearly all its exports, including textiles, leather, marine products, handicrafts, gems, and jewelry. Tariffs on commodities like tea, coffee, spices, and processed foods will also be lowered or removed.
However, India has protected sensitive sectors such as dairy, cereals, poultry, soy meal, and certain fruits and vegetables to balance export growth with domestic priorities.
Mobility and geopolitical context
The deal includes a mobility framework to ease short-term travel restrictions for professionals between India and the EU. Leaders framed the agreement as a strategic response to global protectionism, particularly tensions with the U.S.
"This is the tale of two giants-the world's second and fourth largest economies-choosing partnership in a true win-win fashion. A strong message that cooperation is the best answer to global challenges."
Ursula von der Leyen, European Commission President
European Council President António Costa, without naming the U.S., emphasized that the deal sends a message that "India and the EU believe more in trade agreements than in tariffs" at a time when protectionism is rising.
Economic and strategic implications
With a combined GDP representing nearly 25% of the global economy, the EU and India aim to diversify trade partnerships amid pressure from U.S. tariffs. India faces 50% tariffs imposed by the U.S. last year, while the EU has clashed with Washington over trade policies, including a recent dispute over a proposed U.S. takeover of Greenland.
Indian Prime Minister Narendra Modi called the agreement "India's biggest free trade deal," predicting it would ease access to European markets for farmers and small businesses while boosting manufacturing and services. "It will boost innovative partnerships," he added.
Next steps and broader cooperation
The formal signing is expected later this year, pending approval by the European Parliament and Council. Alongside the trade deal, both sides are advancing talks on security, defense, and climate action.
India's Defense Minister Rajnath Singh discussed bilateral security issues with EU officials, including supply-chain integration for defense ecosystems. A draft security and defense partnership covering maritime security, cyber threats, and defense dialogue is also in progress.
The EU remains India's largest trading partner in goods, with bilateral trade reaching $136 billion in 2024-25, nearly doubling over the past decade. Negotiations, which began in 2007, stalled in 2013 but resumed in 2022.
Global trade landscape
The deal follows India's recent trade agreements with the UK, Oman, New Zealand, and the European Free Trade Association. The EU, meanwhile, finalized a pact with South America's Mercosur bloc earlier this month after 25 years of talks.
