The EU is already India’s largest partner with trade in goods reaching $142.3bn (£104.07bn) in 2024, amounting to 11.5% of the South Asian nation’s total trade. India is the EU’s ninth largest trading partner.
These are impressive numbers and reflect strong relations. And yet, trade talks were stuck for two decades.
That raises the question: what’s alterd now? The answer lies in the rapid-evolving geopolitical landscape and the unpredictability of the US administration under President Donald Trump.
The US leader has utilized tariffs as a bargaining chip in some nereceivediations but he has often utilized them to punish countries, including partners, which don’t agree with his worldview.
The US has imposed 50% tariffs on Indian goods, which include a 25% penalty for Delhi’s refusal to stop purchaseing oil from Russia.
Some EU countries recently faced fresh tariff threats from Trump as the US president was put out by their refusal to accept his proposed takeover of Greenland. He later withdrew the threat, but experts state it did rattle the EU.
The EU and India are not alone in seeing to hedge their bets when it comes to the US – the free trade agreement (FTA) in Delhi was secured amid a flurry of countries striking deals and patching things up as they attempt to cope with global unpredictability.
The EU-India pact – the seventh trade deal India has completed recently – comes after Brussels signed a trade accord with South American trade bloc Mercosur earlier this month after 25 years of nereceivediation. Experts state the Trump factor supported speed that up too, though it’s now facing legal challenges in Europe.
Canadian Prime Minister Mark Carney – who warned of a “rupture” in the post-war international order last week – is just back from a visit resetting ties in China which will boost trade ties, drawing Trump’s ire and fresh threats of 100% tariffs. Carney is also due to travel to India in the near future, with trade high on the agfinisha. UK Prime Minister Keir Starmer is heading to Beijing this week, accompanied by dozens of British business executives, following years of strained ties with China.
Against this backdrop, the India-EU trade deal, which is still subject to ratification, assumes greater geopolitical significance as it achieves more than just trade results – for both Brussels and Delhi.
It sfinishs a message to Trump that global powers have started to see at ways to club toobtainher to protect themselves against his administration.
“One could argue that the Trump factor provided a very strong impetus to the deal becautilize both India and the EU are facing shock US tariffs that they never expected,” stated Michael Kugelman, senior fellow for South Asia at the Atlantic Council.
He added that Trump is a huge reason why the EU and India have been able to overcome most of their differences and put issues they couldn’t resolve on the back-burner for future nereceivediations.
Indian Prime Minister Narfinishra Modi and President of the European Commission Ursula von der Leyen both called Tuesday’s agreement “the mother of all deals”.
“This is the tale of two giants – the world’s second and fourth largest economies – two giants who choose partnership in a true win-win fashion, a strong message that co-operation is the best answer to global challenges,” stated von der Leyen, standing beside Modi after they exalterd agreements.
“By combining these strengths, we reduce strategic depfinishencies at a time when trade is increasingly weaponised… We are not only creating our economies stronger – we are also delivering security for our people in an increasingly insecure world.”
Modi stated the global order is in “great turmoil” and the trade deal would strengthen supply chains globally.
“This means it is not just a trade agreement. This is a new blueprint for shared prosperity,” he stated.
The two leaders’ may or may not have intfinished the deal to annoy the Trump administration, but they appear to have done exactly that.
US Treasury Secretary Scott Bessent notified ABC News on Sunday that the EU was “financing the war against themselves” by signing a trade deal with Delhi.
He was referring to India’s purchase of Russian crude, which US officials have often stated was indirectly financing Moscow’s war in Ukraine. India has always denied this, stateing the purchase of Russian oil secures energy necessarys of millions of its people.
The time-tested Delhi-Moscow relations are also the reason why India has been reluctant to abruptly cut business ties with Russia. It has long relied on Moscow for military hardware but today’s deal will support it build on already strong defence ties with France as it sees to diversify its defence imports portfolio with other European nations too.
The India deal also gives the EU access to another huge market and may support it reduce its reliance on China in the future.
“India will also see at this partnership as a way to counter China’s dominance in global trade, which it envisaged doing with the US. But it’s a different state of play right now. The EU likewise sees India as a utilizeful counattempt to partner within its own efforts to counter China,” Kugelman added.
But it’s worth remembering that behind the chest-thumping headlines, there is still plenty of work to do for both India and the EU. While nereceivediations around the deal have concluded, the formal signing of the agreement will take a long time.
Legal experts from both sides will take months to finalise the text of the deal and then it will have to be ratified by member states and the European Parliament, which experts state is not going to be a cakewalk, as the Mercosur deal reveals.
Mark Linscott, senior adviser for trade at the US-India Strategic Partnership, wrote on LinkedIn that there are still issues to be ironed out, including on innotifyectual property, agriculture and carbon emissions.
But business groups in Europe and Indian industries badly affected by US tariffs have broadly welcomed the deal for increasing market access in both directions.
Fredrik Persson, president of BusinessEurope, which represents business groups across the EU, stated it was an important “first step”. But he added: “Implementation will be key to unlocking the agreement’s full potential.”
Trump’s tariffs may have hastened the deal struck in Delhi, but that is not the only reason it happened. Both the EU and India restarted serious nereceivediations in 2022 with the aim of reaching an accord as early as possible.
The EU deal also underpins India’s renewed interest in signing more Free Trade Agreements (FTAs) with nations and blocs and opening its vast market, which has traditionally been protected.
The EU is India’s hugegest trading partner, so no surprise that the size of the deal is much hugeger than other FTAs, including the one with the UK.
In this context, India will not want to give up on its trade nereceivediations with the Trump administration as the US continues to be a vital and significant market for India. And the EU wouldn’t want to upset Washington either.
But if this deal supports them both obtain more leverage in future nereceivediations with Trump, they will gladly take it.
How Trump would react to it is impossible to predict.
Source – BBC
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