Trump-era tariff rhetoric and renewed geopolitical friction have made global trade feel less optimistic than it has in a long time. It’s increasingly difficult to see positive developments that signal stability or long-term cooperation.
In that climate, when Ursula von der Leyen announced the signing of a free trade agreement between the European Union and India — calling it the “mother of all deals” — it stood out as a rare positive signal for global trade and a potential marker of strategic realignment.
The negotiations have stretched over more than two decades, moving through pauses and restarts. It’s good to finally see the agreement come through.
A large market, finally opening a little more
On paper, the scale is hard to ignore. The EU and India together represent close to two billion consumers. Bilateral trade today stands around $136 billion, and expectations are that this could rise meaningfully once tariffs and regulatory frictions ease.
A few headline numbers help ground the discussion:
- European car tariffs: From ~110% to about 10% for a quota of roughly 250,000 vehicles annually.
- Premium alcohol duties in India: Wines from ~150% to ~20%, spirits to ~40%.
- Electrical machinery: The EU’s largest export category to India (roughly $16 billion) moving toward near-total tariff elimination.
- Pharma and chemicals: Large duty reductions from the current 11–22% range.
On the Indian side, the benefits skew toward labor-intensive sectors where EU tariffs were still meaningful — textiles, apparel, leather, footwear, marine products, gems and jewellery, and selected manufacturing categories.
Services and mobility
Beyond goods, services deserve equal attention.
- The EU has committed across 144 services subsectors, including IT/ITeS, professional services, education and business services.
- India has opened 102 subsectors, including telecom, financial, maritime and environmental services.
This improves predictability for cross-border services delivery and investment-led expansion.
Mobility provisions cover business visitors, intra-corporate transferees, contractual service suppliers and independent professionals. Over time, potential social security agreements with EU member states could further reduce friction for mobile talent and cross-border teams.
For firms building delivery centres, consulting practices, engineering services or technology partnerships in Europe, regulatory clarity often matters more than tariff arithmetic.
The operational reality
The agreement is not yet operational.
Several steps still lie ahead:
- Legal scrubbing of the negotiated text
- Translations across multiple EU languages
- Cabinet approvals
- Parliamentary ratifications
Taken together, this could easily stretch until 2027 before full implementation. Businesses planning around the agreement need patience and realism. Trade agreements move slowly even when political will exists.
Commercial benefits will arrive gradually.
In many categories, tariff reductions will be phased over seven to ten years.
Supply chains matter more than tariffs
Tariffs matter, but competitiveness will ultimately depend on deeper operational factors:
- Access to raw materials and intermediate inputs at the right cost
- Fixing inverted duty structures that distort manufacturing economics
- Improving quality standards, compliance readiness, and reliability for EU buyers
- Aligning FDI, logistics, and component ecosystems so exports scale sustainably
This mirrors what often shows up in cross-border projects. Market access without supply-chain readiness creates friction. Orders may arrive, but capacity, quality systems, or certification processes lag.
a strategic recalibration
The deal is increasingly being perceived as more than a tariff arrangement. It reflects a broader strategic recalibration between India and the EU.
The partnership now spans:
- Defence and security cooperation, including the EU’s first formal security partnership in Asia
- Space and advanced technology collaboration, building on recent joint missions
- Digital and green standards coordination through the India–EU Trade and Technology Council
In a world where geopolitical alignment increasingly shapes supply chains and investment flows, this positioning matters. The EU and India are signalling reliability and institutional continuity at a time when global trade policy — particularly from the US — has become less predictable.
Both Brussels and Delhi appear to be diversifying strategic partnerships without overt confrontation. It feels pragmatic rather than ideological.
The unresolved issue: CBAM
One important uncertainty remains.
The EU’s Carbon Border Adjustment Mechanism (CBAM) is largely unaddressed in the agreement. As Europe begins taxing imports based on embedded carbon emissions, Indian exporters in carbon-intensive sectors may continue facing additional compliance and cost pressures even as EU goods enter India under reduced tariffs.
Cooperation platforms and transition funding help, but they do not directly offset exporters’ carbon exposure, audit complexity or reporting burden.
Closing view
While the agreement is a strategic win in a fragmented trade environment, its commercial value will be measured over time — not immediately — because:
- Implementation will be slow, with multi-year regulatory and ratification processes.
- Currency movements may offset tariff gains, especially for import-sensitive sectors.
- Operational readiness will matter more than headline access, particularly in supply chains and compliance.
- CBAM remains a structural risk for carbon-intensive exporters.
The EU–India FTA strengthens alignment, predictability, and long-term cooperation. Its real impact will compound gradually rather than arrive in a single wave.
