India and the European Union (EU) On Tuesday sealed a deal that will slash tariffs on most goods as part of their initiatives to boost two‑way trade and reduce reliance on the United States (U.S) amid growing global trade whirlwinds.
The EU said the deal was expected to double EU exports to India by 2032 by eliminating or reducing tariffs in 96.6% of traded goods by value, and will lead to savings of 4 billion euros ($4.75 billion) in duties for European companies.
A news report from Reuters on the merchandize trade pact between India and the EU indicated that based on the terms, the EU would cut tariffs on 99.5% of goods imported from India over seven years, with tariffs to be cut to zero on Indian marine goods, leather and textile products, chemicals, rubber, base metals and gems and jewellery, India’s trade ministry said in a statement.
India and the EU said agriculture-related items like soya, beef, sugar, rice and dairy have been kept out of the purview of the trade deal.
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Commenting on the deal, Indian Prime Minister, Narendra Modi, said: “Yesterday, a big agreement was signed between the European Union and India.
“People around the world are calling this the mother of all deals. This agreement will bring major opportunities for the 1.4 billion people of India and the millions of people in Europe”, Modi added.
Reuters recalled that the two-decade-long EU–India trade talks gained momentum after Washington imposed a 50% tariff on some Indian goods, and as U.S. allies pushed back against President Donald Trump’s tariff threats and his bid to take over Greenland.
According to the online news medium, in a speech that got a standing ovation in Davos last week, Canada’s Prime Minister, Mark Carney, urged middle powers to come together to avoid becoming victimised. He is planning to visit India to sign deals on uranium, energy and minerals, after striking a deal with China..
Before signing the deal with New Delhi, the EU agreed a pact with the South American bloc Mercosur, following deals last year with Indonesia, Mexico and Switzerland. During the same period, New Delhi finalised pacts with Britain, New Zealand and Oman.
The European Commission President, Ursula von der Leyen, said: “Europe and India are making history today. This is only the beginning.”
Available data showed that trade between India and the EU stood at $136.5 billion in the fiscal year through March 2025, compared to $132 billion of trade between India and U.S., and $128 billion between India and China.
Reuters further clarified that an Indian government official aware of the matter said that the formal signing of the India-EU deal would take place after legal vetting expected to last five to six months.
The EU projected that the deal with India would open up the South Asian nation’s vast and highly guarded market, with New Delhi slashing tariffs on cars to 10% over five years from as high as 110%, benefiting European automakers such as Volkswagen, Renault, Mercedes-Benz and BMW.
According to an EU statement, the reduced tariffs on autos would be granted to 250,000 cars a year valued over 15,000 euros and will be cut to 30%-35% as soon as the deal is implemented, both sides.
India is also slashing tariffs on alcoholic beverages like wines to 75% immediately from 150%, which would be lowered to 20% gradually. Tariffs on spirits will be lowered to 40%, and the deal will also cut tariffs on a slew of EU goods coming to India including machinery, electrical equipment, chemicals and iron and steel, the EU said.
However, there is no immediate relief for Indian companies hit by carbon tax under the EU’s Carbon Border Adjustment Mechanism (CBAM) that started on January 1.
Besides steel, the decarbonisation-oriented levy applies to cement, electricity, fertilisers and other products as well.
India said it had got a commitment from EU that it would get flexibilities on the carbon tax if they are granted to any third countries.
Separately, the EU agreed to provide financial support of 500 million euros over the next two years to help India in cutting greenhouse gas emissions.
