The trade agreement between India and the European Union reflects strategic calculations shaped by global political uncertainty as much as commercial interests, following years of stalled negotiations and rising trade tensions linked to US tariff policies.
Trade Scale And Long Stalled Talks
The European Union is India’s largest trading partner, with trade in goods reaching $142.3bn, or £104.07bn, in 2024. That figure accounts for 11.5% of India’s total trade, while India ranks as the EU’s ninth largest trading partner. Despite these figures, negotiations between European Union and India remained unresolved for nearly two decades.
The renewed momentum comes as the geopolitical environment shifts, driven in part by uncertainty surrounding US trade policy under Donald Trump.
US Tariffs And Strategic Repositioning
The US has imposed tariffs of up to 50% on Indian goods, including a 25% penalty tied to India’s continued purchase of Russian oil. Several EU member states have also faced tariff threats in recent months, including disputes linked to Greenland, which were later withdrawn but unsettled European policymakers.
These developments have encouraged countries to reassess trade dependencies. The EU India agreement is the seventh trade deal India has completed in recent months and follows a separate EU trade accord with Mercosur signed earlier this month after 25 years of negotiations.
Broader Global Trade Realignments
Other countries are also adjusting their trade strategies. Canadian Prime Minister Mark Carney recently visited China to reset trade ties, drawing criticism and tariff threats from Washington. UK Prime Minister Keir Starmer is travelling to Beijing with British business leaders following years of strained relations.
Against this backdrop, the EU India agreement, which remains subject to ratification, carries political weight beyond market access.
Views From Analysts And Negotiators
Michael Kugelman, senior fellow for South Asia at the Atlantic Council, said the Trump factor played a major role in accelerating negotiations. He said both India and the EU faced unexpected US tariffs, helping them overcome long standing differences and defer unresolved issues to future talks.
Leaders Frame Deal As Strategic Partnership
Indian Prime Minister Narendra Modi and European Commission President Ursula von der Leyen described the agreement as “the mother of all deals”.
Von der Leyen said the agreement reduces strategic dependencies at a time when trade is increasingly being used as leverage, adding that it strengthens economic resilience and security. Modi said the global order is in turmoil and that the deal would reinforce global supply chains.
US Response And Energy Dispute
US Treasury Secretary Scott Bessent criticised the agreement, saying the EU was financing its own security risks by trading with India, citing India’s continued imports of Russian crude. India has rejected claims that such purchases fund Russia’s war in Ukraine, saying the imports are necessary to meet domestic energy needs.
India’s long standing defence ties with Russia have also influenced its cautious approach, although the agreement with the EU may support efforts to diversify defence imports, including stronger links with France and other European states.
China Factor And Market Access
The deal offers the EU access to another large market and may support efforts to reduce reliance on China. Kugelman said India also views the partnership as a way to counter China’s role in global trade, a strategy it previously explored through closer ties with the US.
Ratification And Outstanding Issues
While negotiations have concluded, legal experts from both sides are expected to spend months finalising the agreement before it is sent for approval by EU member states and the European Parliament. The Mercosur agreement has shown that ratification can face significant political hurdles.
Mark Linscott, senior adviser for trade at the US India Strategic Partnership, said issues remain around intellectual property, agriculture, and carbon emissions.
Business Reaction And Next Steps
Business groups on both sides have broadly welcomed the agreement. Fredrik Persson, president of BusinessEurope, called it an important first step, while noting that implementation will determine its full impact.
The EU deal also reflects India’s renewed interest in signing more free trade agreements and opening its traditionally protected market. Despite this shift, India is expected to continue trade discussions with the US, which remains a key market, while the EU also seeks to maintain stable relations with Washington.
Featured image credits: Flickr
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