India’s Prime Minister Narendra Modi (C) poses for {a photograph} with European Fee President Ursula von der Leyen (R) and European Council President Antonio Costa in New Delhi, India, on January 27, 2026.
Sajjad Hussain | Afp | Getty Photographs
India and the European Union have finalized a commerce deal that may take away or cut back tariffs on greater than 90% of products traded between the 2.
The free commerce settlement would see India cut back tariffs on European car and agricultural merchandise, whereas the EU would do the identical for Indian textiles, leather-based, marine merchandise and gems and jewellery.
Many of those Indian exports have been affected by the U.S. imposing 50% tariffs.
“We’ve got created a free commerce zone of two billion individuals, with either side set to achieve economically,” stated European Fee President Ursula von der Leyen. She added that the deal sends “a sign to the world that rules-based cooperation nonetheless delivers nice outcomes”.
The “historic” deal comes at a time when New Delhi is going through the brunt of U.S. tariffs and is taking a look at various markets for its exports. The EU’s long-standing commerce ties with the U.S., its largest buying and selling associate, have been examined amid President Donald Trump’s push to annex Greenland.
India’s Commerce and Trade Minister Piyush Goyal stated in a press convention on Tuesday that he anticipated the deal would come into drive in 2026.
India is the EU’s ninth-largest buying and selling associate, accounting for two.4% of the bloc’s whole commerce in items in 2024, far behind main companions just like the U.S. (17.3%), China (14.6%), or the U.Ok. (10.1%). However the EU is one in all India’s largest buying and selling companions, rivaling the U.S. and China.
‘The mom of all offers’
Von der Leyen known as it the “mom of all offers.”
The deal would cut back India’s tariffs on European merchandise by round 4 billion euros ($4.7 billion) a yr, the European Fee stated in a launch.
The deal, which the EU expects will assist it double its exports to India by 2032, will cut back tariffs on over 90% of European exports to India, akin to autos, equipment, agri-food merchandise, chemical substances, and plane.
“India will grant the EU tariff reductions that none of its different buying and selling companions have acquired, dramatically bettering market entry for EU exports,” the European Fee stated.
A freight prepare carrying cargo containers rides alongside a railway observe in Ajmer on August 26, 2025.
Himanshu Sharma | Afp | Getty Photographs
New Delhi has defied expectations of consultants by providing to ease tariffs on sectors akin to automotive and agriculture, that are notably delicate to the levies.
India plans to scale back tariffs on European automobiles “step by step” from 110% to 10% and abolish duties on automobile components after 5 to 10 years. Some main European car firms in India embrace Renault, Volkswagen, BMW, and Mercedes.
New Delhi has additionally almost eradicated tariffs of as much as 44% on equipment, 22% on chemical substances and 11% on prescription drugs.
The deal has additionally diminished or eliminated excessive tariffs on agricultural merchandise exported from Europe akin to wine and olive oil. It additionally retains European agricultural sectors beef, hen meat, rice and sugar protected against imports from India.
“Beneath this settlement, European wines, spirits, beers, olive oil, confectionary, and different merchandise will take pleasure in preferential entry to the quickly rising Indian market,” stated Christophe Hansen, EU commissioner for agriculture and meals.
Indian auto shares hit
In India, shares of main carmakers and alcoholic beverage firms plunged on the information of the deal.
Shares of Japanese carmaker Maruti Suzuki ended 1.5% down, whereas these of Korean firm Hyundai Motor India closed 3.6% decrease. Indian automotive firms Tata Motors and Mahindra & Mahindra ended 1.3% and 4.2% decrease, respectively.
The Indian authorities has stated the deal will give Indian customers entry to high-tech vehicles and higher competitors.
“The reciprocal market entry in EU market can even open up alternatives for India made vehicles to entry the EU market,” it stated.
Equally, shares of India-based alcoholic beverage firms additionally fell. Shares of wine maker Sula Vineyards fell 4.1% whereas Heineken N.V.-owned United Breweries and Diageo-owned United Spirits fell over 2%.
The commerce deal would elevate levies on Indian sectors which were hit by the 50% U.S. tariffs and supply New Delhi with “preferential entry to the European markets” for greater than 90% of its traded items.
Textiles, attire, marine, leather-based, footwear, chemical substances, plastics, sports activities items, toys, gems, and jewellery will incur zero responsibility as soon as the free commerce settlement comes into drive, India’s commerce ministry stated in a press release accompanying the announcement.
These items from these “key labor-intensive sectors” account for $33 billion in exports. Earlier than the deal, the EU tariffed them at charges of between 4% to 26%.
“This could increase India’s export competitiveness in these sectors, that are at present below pressure because of larger US tariffs,” stated Sonal Varma, chief economist for India and Asia ex-Japan, at Nomura.
Job creation in India
The EU-India commerce deal might create six or seven million jobs within the textile sector alone, Goyal informed Tuesday’s press convention, including that the sector was the second-biggest employer in India after agriculture.
India and the EU will put in place a framework to permit for non permanent entry and keep for professionals, together with enterprise guests, intra-corporate transferees, contractual service suppliers, and impartial professionals.
India’s IT service sector, skilled companies, and training companies are “well-positioned” to profit from the mobility provisions, Nomura’s Varma stated.
In monetary yr 2025, India’s bilateral commerce in items with the EU stood at 11.5 trillion rupees, or $136.54 billion), in response to a launch by India’s commerce ministry. New Delhi’s exports to Europe had been $75.85 billion and imports had been $60.68 billion, it stated.
