The EU and India close "the biggest trade deal in history"

BrusselsThe European Union is increasingly isolated. The Russian invasion of Ukraine severed relations with Moscow, China poses a growing threat to EU industry, and the United States is increasingly distancing itself from European interests, both militarily and commercially. Against this backdrop, the European bloc is seeking new allies and has finalized a trade agreement with India, the world's most populous country. "It's the mother of all deals," European Commission President Ursula von der Leyen has repeatedly called it.

The two powers staged a handshake at a bilateral summit this Tuesday in New Delhi. In fact, Von der Leyen and the President of the European Council, António Costa, have been in India since Sunday as "guests of honor," and have witnessed the celebrations and military parade of the 77th Republic Day, along with Indian Prime Minister Narendra Modi.

Brussels claims the pact will open a new market of 1.4 billion people in the European Union, creating a free trade area of ​​around 2 billion. "It is the biggest trade agreement in history," declared European Trade Commissioner Maroš Šefčovič in an interview. EuronewsAccording to data provided by the European Commission, both parties will save €4 billion annually in tariffs. It's worth noting that trade between the two has increased substantially in recent years, especially since Donald Trump's return to the White House, which led to higher tariffs in both India and the EU. In the last decade alone, transactions between the two have increased by 90%, reaching €48.8 billion in 2024. Currently, India applies very high tariffs to European products, in some cases reaching up to 150%. On average, customs duties will be reduced to 33%. Brussels is particularly interested in importing essential materials and products to boost Europe's clean industry, such as electric batteries, chemicals, diamonds, and access to digital services. For its part, the European Commission wants to increase sales of cars, alcoholic beverages, and various agri-food products. Meanwhile, India has been pushing to lower customs duties on clothing, steel, petroleum products, electrical machinery, and pharmaceuticals, among other things.

In the end, tariffs on EU wine exports to India will drop from 150% to between 20% and 30%, beer from 110% to 40%, and other alcoholic beverages from 150% to 40%. Olive oil and margarine will be exempt from tariffs, whereas until now they were subject to rates of 40%, as were biscuits and ultra-processed foods (previously at 50%), vegetable juices and non-alcoholic beverages (previously at 55%), and lamb. Beyond the agri-food sector, the agreement also ends customs duties on machinery and vehicle engines (previously at 44% and 110%, respectively), pharmaceuticals (previously at 22%), and iron and steel, which remained at 22%. Conversely, some of the most contentious products, on which both sides could not reach an agreement, such as beef, sugar, and rice, have been left out of the trade agreement.

The alternative to Trump

Trump's return to the White House has accelerated negotiations for a trade pact that began almost two decades ago. The US president maintains 50% tariffs on Indian goods and, at least for now, 15% on European Union goods. Thus, with the intention of compensating for weakening relations with the US, both powers have agreed to join forces and strengthen their trade ties. Beyond trade, however, the European Union is also interested in increasing its sphere of influence and halting New Delhi's rapprochement with Russia. In fact, one of the European bloc's concerns about finalizing the agreement is that Modi is playing both sides and also maintaining very good relations with Moscow. India has become one of the main buyers of Russian oil and distributes it worldwide—including to countries within the EU—and exports technological products to Russia that are feared to be used against Ukrainians, such as drones.

In this regard, both parties have also signed a cooperation agreement on security and the arms industry, which aims to strengthen relations in this field and prevent Vladimir Putin's regime from benefiting from Indian technology. In fact, one of the intentions is to increase the fight against so-called "ghost ships," which circumvent EU sanctions and secretly transport Russian fossil fuels.

In any case, it should be remembered that the agreement signed between Brussels and New Delhi still needs the approval of the member states and the European Parliament. As has been seen with the EU-Mercosur trade agreementThese are discussions that can drag on for a long time.