India and European Union Finalize Historic Free Trade Agreement Amid US Tariff Uncertainty

India and the European Union (EU) have finalized a long-awaited and historic free trade agreement, as both sides seek to safeguard their economic interests amid growing uncertainty over US trade policies.

Announcing the development on Tuesday, India and the EU said the agreement was concluded against the backdrop of strained trade relations with the United States.

According to the European Union, the deal is expected to double EU exports to India by 2032. Under the agreement, tariffs will be eliminated or reduced on 96.6 percent of goods exported from the EU’s 27 member states to India, resulting in savings of nearly €4 billion ($4.75 billion) for European companies.

India’s Ministry of Commerce said in a statement that the EU will reduce tariffs on 99.5 percent of Indian goods over the next seven years. As a result, duties on Indian seafood, leather, textiles, chemicals, rubber, base metals, and gems and jewelry will be reduced to zero.

Indian Prime Minister Narendra Modi described the agreement as transformative. “Yesterday, a massive deal was signed between India and the European Union. People across the world are calling it the ‘mother of all deals,’” Modi said. “This agreement will bring enormous opportunities for 1.4 billion Indians and hundreds of millions of Europeans.”

As part of the deal, India will open its vast and tightly protected market to European manufacturers. Import tariffs on cars—currently as high as 110 percent—will be reduced to 10 percent over the next five years, benefiting European automakers.

India will also immediately cut tariffs on wine from 150 percent to 75 percent, with a phased reduction to 20 percent. Duties on spirits will be lowered to 40 percent. Additionally, India will reduce tariffs on machinery, electrical equipment, chemicals, and iron and steel imports from the EU.

European Commission President Ursula von der Leyen hailed the agreement as a landmark moment. “Europe and India are making history today. This is only the beginning,” she said in a social media post.

Trade between India and the EU stood at $136.5 billion in the financial year ending March 2025. The agreement is expected to be formally signed after five to six months of legal review and is likely to come into force within a year.

Media reports note that the deal comes at a time when the EU has also finalized trade agreements with Mercosur, Indonesia, Mexico, and Switzerland. India, meanwhile, has concluded agreements with the United Kingdom, New Zealand, and Oman.

The surge in global trade deals is widely seen as an effort to reduce exposure to risks associated with US trade policies. Tensions have intensified among long-standing Western allies following US President Donald Trump’s attempt to take control of Greenland and his threats to impose tariffs on European countries.

A trade agreement between India and the United States collapsed last year. Renewed negotiations between India and the EU gained momentum after Trump imposed steep tariffs on Indian goods and products from several other countries.

Former Indian commerce official Ajay Srivastava told media outlets that the agreement would boost exports from India’s labor-intensive sectors, helping offset the negative impact of US tariffs. At the same time, reduced duties will allow European products to enjoy immediate price advantages in the Indian market.