India-EU FTA Was Inevitable — Trump Just Hit the Fast-Forward Button

If

global trade is a chessboard, then the India-European Union (EU) Free Trade Agreement (FTA) - billed as “the mother of all deals” - may prove to be the queen’s gambit: bold, strategic, and game-changing. After years of stop-start negotiations, the long-pending India-European Union Free Trade Agreement has been finalised, and it is believed that the trigger may lie far beyond Brussels or New Delhi.

India-EU Finalise Free Trade Agreement

India and the European Union sealed the long-awaited free trade agreement, marking a decisive reset in their economic and strategic partnership at a moment of global uncertainty. Prime Minister Narendra Modi on Tuesday announced the signing of the India-EU Free Trade Agreement, saying that it accounts for 25 per cent of global GDP and one-third of global trade. He said that the FTA with the EU will complement agreements with Britain and the European Free Trade Association (EFTA) and will strengthen both global trade and the supply chain. Tariffs will be slashed on 97% of EU exports to India, according to the trade deal. Duties on cars will be cut from 110% to 10% in a phased manner with quotas, wine tariffs reduced to 20%, while pasta, chocolate and processed foods will see tariffs eliminated entirely. The India, EU FTA will save up to 4 billion euros ($4.75 billion) annually in duties, according to the commission.

India-EU Trade: A Look at Numbers

The EU, as a bloc, is India's largest trading partner in goods, and unlike India's trade with the US or China, the India-EU trade is balanced. For the financial year 2024-25, India's total trade in goods with the EU was worth about USD 136 billion, with exports around USD 76 billion and imports at USD 60 billion.

The bilateral trade is a cornerstone of the India-EU relationship, with total trade surpassing USD 190 billion in 2024-25. India exported USD 75.9 billion in goods and USD 30 billion in services to the EU, while the EU exported USD 60.7 billion in goods and USD 23 billion in services to India. With the FTA, India and the EU have "created a free trade zone of two billion people, with both sides set to benefit," according to Von der Leyen.While it may take at least six months to formally sign the deal, as it will require legal scrubbing by both sides after the announcement, the logic for such an arrangement has existed for nearly two decades. The two sides started negotiations for a trade deal in 2007, which was stalled in 2013 due to a gap in ambition. The negotiations were relaunched in June 2022.What changed over time was not the rationale but the urgency.

The TIMING

The convergence between the two sides was structural; however, the only missing element was momentum. That momentum came not from Brussels or New Delhi, but from Washington. Notably, the deal has been concluded at a time when the world is witnessing new geopolitical upheavals triggered largely by Washington's policies on trade and security under President Donald Trump. Trade, once treated as a technocratic domain, has become openly geopolitical with Trump's tariff-centric policies. The tariff threats and transactional security commitments have sharpened anxieties across Europe.

Trump has threatened to impose 30 per cent tariff on the EU in July last year. Earlier this month, Trump again threatened 10 per cent additional tariffs on eight European nations for their opposition to his demand to take control of Greenland. With Trump's threats, the European Union seems to have realised that economic dependence is a strategic vulnerability. Trump did not invent Europe’s concerns. He simply removed the luxury of time by instilling a threat of abandonment For the European Union, the FTA with India is more of an assurance regarding diversifying partnership, having access to a huge market and dependence on a reliable supply chain. For India, the deal will not only boost manufacturing in India but will also further expand the services sector.

India-EU FTA - Beyond Trade

Trade is the anchor, but the architecture being built is strategic. The India-EU Summit this year focuses on defence, security cooperation, critical technologies and mobility underscores a deeper shift. India and the European Union also finalised a technology and defence partnership. With this, India became the third Asian nation after Japan and South Korea to have such a security partnership with the European bloc. The new pact does not limit India's engagement with the EU to procurement alone, with the EU now seeing India as a potential supplier in certain areas and as a partner.

The kind of partnership New Delhi and Brussels were planning was already hinted at by European Commission President Ursula von der Leyen, who made India the centrepiece of her declaration address at the World Economic Forum at Davos. Furthermore, as she arrived in India, Ursula categorically stated that India and Europe have made a "clear choice" to build a strategic partnership by leveraging their complementary strengths to show a new way of engagement to a "fractured world." "We are showing a fractured world that another way is possible," she said. The European Union leader said that a successful India makes the world more stable, prosperous and secure.