After two decades of failing to come to an agreement, “the Mother of All Deals” is done – kudos to India and the EU

This FTA stands as one of the most consequential global trade realignments in years, driven in part by US tariff pressure and a shift in strategy toward diversifying one’s supply chains. It’s become the “way of the world” (insert Earth, Wind & Fire tune here) in trade as uncertainty has steered more than a few countries to align themselves with trade partners that otherwise may never have been under consideration, much like China and Canada recently.

The settling of differences had been pushed far in the background of discussions for nearly two decades, and the recent breakthrough created an economic zone representing 25% of global GDP and an estimated 33% of global trade. 33%!

It’s designed to deepen economic, strategic, and security cooperation beyond trade alone. These two countries by no means are strangers to each other’s trade offerings as a reasonable data‑grounded estimate shows that India–EU total trade in 2025 was approximately EUR 190–195 billion, based on observed 2024 levels and verified 2025 monthly growth patterns in India’s export sectors. This estimate reflects stable goods flow, strong services growth, and broad‑based export resilience across Europe.

India’s exports to the EU in 2024–2025 were primarily in petroleum products, textiles, leather, gems and jewellery, machinery, and chemicals. EU’s exports to India were in goods covering categories like machinery, transport equipment, chemicals, pharmaceuticals, and high-tech goods. The fact remains that for 20 years these two countries could have been doing a lot better collectively if they had just agreed to disagree on a few things, rolled back some punishing tariffs, and opened their markets to each other even on an experimental basis.

So, what were the obstacles? Several long-standing issues repeatedly stalled India–EU trade negotiations for the 20-year period mainly centred on, of course, tariffs, but also market access, regulatory standards, and intellectual property. These points of contention also explain why talks launched in 2007 collapsed in 2013 and only revived in 2022 when geopolitical pressures forced both sides back to the table only to stall again. Then, viola, enter the tariffs launched around the world by US President Donald Trump, and the uncertainty that goes with them.

The pressure was on both the EU and India to put their differences aside as the largest economy in the world was no longer so reliable in terms of a trade partnership. Neither region was fully to blame as the high tariffs were put in place by both sides, however India was a little bit more brutal tariff-to-tariff. India’s tariffs on EU goods, especially automobiles, wines, spirits, and certain agricultural products were among the biggest dealbreakers. These were explicitly cited as “mutually sensitive” issues that blocked progress. EU tariffs on Indian textiles, leather, footwear, and jewellery were also contentious, as India wanted deeper cuts to boost labour-intensive exports. There were also market access and regulatory barriers to overcome.

The EU pushed for greater access to India’s markets in automobiles, agriculture, and high-value manufacturing, while India sought easier access for services, IT, and skilled labour mobility. Negotiations stalled in 2013 over disagreements on market access, government procurement, environmental clauses, data protection rules, and labour standards. Intellectual property (IP) disputes were also at the forefront as the EU sought TRIPS-plus protections (TRIPS – trade-related aspects of intellectual property rights), such as patent term extensions and data exclusivity, which India resisted due to concerns about access to affordable medicines. Public health groups warned that stronger IP rules could undermine India’s role as a global supplier of low-cost generics.

Regarding agriculture and food standards, the EU insisted on strict sanitary and phytosanitary standards, while India viewed some of these as non-tariff barriers. Sensitive EU agricultural sectors (beef, poultry, sugar, rice) were excluded from liberalisation, limiting India’s export ambitions. There were also roadblocks with sustainability and data governance and digital trade. For years, neither partner prioritised the relationship, leading to less than stellar trade ties. To be more specific, India placed a 110% tariff on vehicles above USD 40,000 and 70% for cars below USD 40,000, which was absolutely brutal. This, of course, was a major sticking point as these tariffs were among the highest car import duties in the world.

In addition, India slapped a 150% tariff on wine, 150% on sprits, and 110% on beer from the EU, turning these rather simple pleasures into luxuries. Chocolate, biscuits, pasta, bread, pastries, pet food were slapped with a 50% tariff, vegetable oils and related products like olive oil, margarine, other vegetable oils received a 45% tariff; fruit juices and non-alcoholic beer, up to 55%. Meat and animal products such as sausages and meat preparations had a 110% tariff; industrial goods machinery and electrical equipment, up to 44%; chemicals, up to 22%; pharmaceuticals, 11%; optical, medical and surgical equipment 27%; and iron and steel, up to 22%.

I could go on and on, but you get the point, and all of these tariffs were far higher than EU tariffs on Indian goods. One might think that these tariffs painted a rather dismal picture for any future trade negotiation to conclude in a mutually beneficial agreement, but here we are.

What’s changed? India agreed to reduce or eliminate tariffs on 96.6% of EU exports, while the EU will phase in reductions covering nearly 99% of India’s exports by value. On EU-originating cars, tariffs drop from up to 110%, as previously mentioned, to a breathtakingly low of 10%, under a quota of 250,000 vehicles per year. European wine, spirits, chocolates, olive oil, and processed foods will see major duty cuts or elimination. Regarding EU chemicals, machinery, and aerospace products, tariffs are largely eliminated. Indian exports such as textiles, leather, gems, jewellery, and engineering goods gain near-zero tariff access to the EU. It looks like China’s playbook here with zero tariffs.

Regarding regulatory and market access, customs procedures have been simplified to speed up trade flows, and there is a separate mobility pact which eases movement for skilled Indian workers and students into Europe. A framework for defence and security cooperation accompanies the trade deal, since the EU doesn’t feel as comfortable these days considering the current NATO relationship with the US.

This India-EU agreement is expected to cut EUR 4 billion annually in tariffs for exporters, and as a result, EU exports to India are projected to double by 2032. The agreement also supports and potentially expands 800,000+ EU jobs tied to exports to India and strengthens supply chain integration and joint manufacturing capacity.

It goes without saying, but I will say it again anyway – US tariffs under President Trump accelerated these negotiations, pushing India and the EU to hedge against trade unpredictability. Obviously, both sides see the deal as a stabilising force amid global trade fragmentation.

For India, it diversifies export markets away from US exposure, and boosts manufacturing competitiveness. For the EU, it opens one of the world’s fastest-growing consumer markets and strengthens strategic ties in the Indo-Pacific. Kudos to these two trade partners, finally coming together for the sake of greatly enhanced trade and a subsequent boost to their economies going forward.