India and EU Seal Major Trade Deal Amid US Tensions

India and the European Union announced a major free trade agreement on Tuesday after 18 years of negotiations. Leaders from both sides met in New Delhi for the India-EU Summit 2026, where they wrapped up the deal dubbed the 'mother of all deals.' The pact comes as both regions deal with trade pressures from the United States. It covers tariff cuts on goods worth billions and sets rules for services, investment, and digital trade.

Background

Talks for this agreement started back in 2007 but stalled many times over issues like farm goods and market access. Both sides pushed hard in recent years to get it done. India wanted better entry for its textiles, engineering goods, and farm products into Europe. The EU sought to sell more cars, wine, chemicals, and machinery in India, where high tariffs had blocked sales.

The summit brought together Indian Prime Minister Narendra Modi, European Commission President Ursula von der Leyen, and European Council President Antonio Costa. They signed off on the trade deal plus 13 other pacts on security, defense, and worker mobility. This move builds on growing ties between India and the 27-nation EU bloc.

Global trade tensions played a big role. The US has hit both with high import taxes, pushing India and Europe to team up. EU exports to India already hit around €40 billion last year and support 800,000 jobs in Europe. The deal aims to grow that sharply.

India sees this as its biggest market opening ever to a partner. Europe calls it ambitious, giving their companies a head start in the fast-growing Indian economy. Sensitive farm items like beef, rice, and sugar stayed out to avoid fights with European farmers.

Key Details

The deal eliminates or cuts tariffs on over 90% of goods traded between the two. India will drop duties on 96.6% of EU exports by value. The EU will do the same for nearly 99% of Indian exports in stages.

Tariff Cuts on EU Goods to India

EU companies stand to save up to €4 billion a year in duties. Here's what changes:

• Cars: Duties fall from 110% to 10% on a quota of 250,000 vehicles per year.
• Aircraft and parts: Tariffs go to zero for almost all products.
• Machinery: Up to 44% duties mostly eliminated.
• Chemicals: Up to 22% duties gone for nearly everything.
• Pharmaceuticals: 11% duties removed on most items.
• Wine: Down to 20-30% from 150%.
• Spirits: Cut to 40% from up to 150%.
• Beer: Halved to 50% from 110%.
• Olive oil and vegetable oils: Zero tariffs.
• Fruit juices and processed foods: Duties eliminated.

These changes hit big EU export sectors. Machinery and electrical gear alone were €16.3 billion last year. Aircraft exports were €6.4 billion.

Gains for Indian Exports to EU

India gets phased tariff reductions on textiles, apparel, leather, footwear, handicrafts, engineering goods, and marine products. Nearly all lines will see cuts, covering 99% by value over time.

Other Parts of the Deal

• Services: EU firms get better access to India's financial and maritime sectors.
• Digital trade: Rules for safe online business.
• Small businesses: A special chapter with contact points to ease trade.
• Climate: €500 million from EU over two years to help India cut emissions.
• Rights: Strong rules on trademarks, designs, copyrights, and trade secrets.
• Customs: Simplified steps to speed up exports.

"This agreement will deepen economic ties, create opportunities for our people and strengthen the India-Europe partnership for a prosperous future." – Prime Minister Narendra Modi

Commerce Secretary Rajesh Agrawal called the deal balanced and forward-looking. It boosts trade and investment flows right away.

Formal signing comes later this year after legal checks. The EU Parliament must ratify it. The pact could start next year.

What This Means

EU exports to India could double by 2032. That means more jobs in Europe—millions potentially—and stronger supply chains. India gains from integrated manufacturing and new markets for its goods. Together, they represent 25% of world GDP and a third of global trade.

The deal affects up to 2 billion people. It cuts €4 billion in annual tariffs and opens doors for services and tech. Businesses get fewer barriers and more predictability.

US reaction draws attention. Some American voices call it Europe funding issues against themselves, given US trade moves. But India and EU leaders focus on their gains.

Supply chains shift too. Joint factories in autos, chemicals, and pharma could grow. Green funding speeds India's clean energy shift, tying trade to climate action.

Worker mobility pacts let more Indian talent head to Europe. Security deals build trust on defense matters. Over five years, a strategic agenda covers trade, green goals, and people links.

EU firms get first-mover edge in India, a market of 1.4 billion. Indian exporters tap Europe's rich consumers. Both cut reliance on other big traders amid global uncertainty.

The pact rolls out in phases. Quotas on cars, wine, and whiskey ease high duties without flooding markets. Customs fixes make shipping faster and cheaper.

Jobs top the list. EU side sees growth in autos, farms, and services. India builds on textiles and engineering. Small firms get tools to join in.