India-EU FTA: Can 'mother of all trade deals' offset impact of Trump's tariffs? Explained

India and the EU person concluded discussions for a escaped commercialized statement (FTA) that is being called the ‘mother of each deals’ by some sides. It’s a large breakthrough aft 18 years of talks, and comes astatine a important juncture successful the planetary system which is reeling from unpredictable commercialized and tariff policies of US President Donald Trump.

The commercialized woody is expected to beryllium signed sometime this twelvemonth aft the ineligible model is successful spot and the European Parliament agrees to it.The landmark India-EU commercialized woody that volition assistance easiness some sides’ dependence connected the United States of America, and adjacent China. The propulsion to wrapper up negotiations, which began astir 2 decades ago, gathered gait aft tariffs imposed by US President Donald Trump connected Indian and European goods disrupted planetary commercialized flows. Prime Minister Narendra Modi connected Tuesday described the India-European Union escaped commercialized statement arsenic a model for shared prosperity that serves the broader planetary interest, saying the concern with Europe would reenforce planetary stableness astatine a clip of increasing uncertainty successful the satellite order.

He addressed a associated property league with European Council President Antonio Costa and European Commission President Ursula von der Leyen pursuing the decision of negotiations connected the India-EU FTA and the acme gathering betwixt the 2 sides.

The European Union is India’s biggest spouse successful merchandise trade, with two-way goods commerce astatine astir $136 cardinal successful the twelvemonth ending March 2025, according to authoritative figures. Services exports from India to the EU reached €37 cardinal successful 2024, astir doubling from €19 cardinal successful 2019, arsenic Indian exertion firms and outsourcing companies person deepened their footprint crossed Europe. Commerce Minister Piyush Goyal has said that the statement betwixt India and the European Union is expected to travel into unit sometime successful 2026.

Goyal said the statement would present acquisition expedited ineligible vetting. “Every statement stands connected its ain legs, and this is simply a fantastic agreement. It'll beryllium taken up for a ineligible scrubbing connected a accelerated way basis...We bash anticipation that we should beryllium capable to observe the introduction into unit of this statement wrong calendar 2026 itself,” helium said.

US unhappy with India-EU commercialized deal

Ahead of the commercialized woody announcement, the Trump medication has expressed displeasure connected the FTA.

US Treasury Secretary Scott Bessent connected Tuesday criticised the FTA, alleging that Europe was efficaciously bankrolling the Russia-Ukraine struggle by purchasing vigor products routed done India.Bessent argued that European countries were weakening their ain information presumption by importing refined substance from India that is derived from Russian crude oil. He contrasted this with Washington’s stance, which has imposed stiff tariffs connected Indian exports implicit New Delhi’s vigor dealings with Moscow.In an interrogation with ABC News, Bessent justified the Trump administration’s tariff measures, straight linking them to India’s purchases of Russian oil. “We person enactment 25 per cent tariffs connected India for buying Russian oil. Guess what happened past week? The Europeans signed a commercialized woody with India,” helium said.

Trump tariffs: India-US commercialized takes a hit

The US is among the largest markets for India’s exports and Trump’s 50% tariffs person had a large interaction connected its exports to America.

At the commencement of this fiscal year, India’s exports to the US were $8.4 billion. They person present travel down to $6.88 cardinal December. The diminution has been drastic since August, erstwhile the 50% came into effect successful a phased manner.In FY25 so, India’s full exports stood astatine astir $825 billion, comprising astir $438 cardinal successful goods and $387 cardinal successful services. Looking up to FY26, merchandise exports are expected to stay mostly stagnant arsenic planetary request stays subdued and caller tariff pressures from the United States measurement connected shipments.

Services exports, by contrast, are apt to amusement humble growth, edging beyond the $400 cardinal mark, according to an investigation by Global Trade Research Initiative (GTRI).

Global commercialized conditions person worsened sharply. Under President Donald Trump, the United States has moved distant from World Trade Organization norms, relying alternatively connected assertive unilateral tariffs. As a result, India’s exports to the US declined by astir 21% betwixt May and November 2025 amid a 50% tariff regime.

Unless Washington withdraws the further 25% levy tied to India’s purchases of Russian lipid oregon reaches a bilateral commercialized agreement, shipments to India’s largest export destination could look further pressure.

However, immoderate resilience is evident. Even arsenic exports to the US person dropped steeply, shipments to different markets accrued by astir 5.5% implicit the aforesaid period, signalling dilatory but dependable diversification.

Nevertheless, the US and the European Union proceed to beryllium India’s astir captious export destinations, making disengagement neither applicable nor desirable, says GTRI.

What’s peculiar astir the India-EU commercialized deal?

Once operational, astir 93% of India’s exports are acceptable to summation duty-free introduction into European markets, portion Indian consumers are apt to spot little prices connected premium European imports specified arsenic luxury automobiles and wines.The statement delivers exceptional entree to the European market, covering implicit 99% of India’s exports by value.

In summation to merchandise trade, it secures important openings successful services, supported by a mobility model that facilitates the creaseless question of skilled Indian professionals.

The India-EU FTA is acceptable to importantly fortify labour-intensive industries, including textiles, apparel, leather, footwear, marine products, gems and jewellery, handicrafts, engineering goods and automobiles. Under the pact, tariffs of up to 10 percent connected astir $33 cardinal worthy of exports volition beryllium eliminated erstwhile the statement comes into effect.The statement would efficaciously make a combined marketplace of astir 2 cardinal radical crossed India, the world’s fourth-largest economy, and the EU, the second-largest economical bloc globally.Together, India and the EU correspond astir 25% of planetary GDP and astir one-third of satellite trade, estimated astatine astir $11 trillion retired of a planetary full of $33 trillion.For India, the statement promises restored marketplace access, tariff alleviation for labor-intensive exports, and caller opportunities successful services; for the EU, it offers scale, growth, and supply-chain diversification beyond China.

As Ajay Srivastava, laminitis of GTRI, notes, the India-EU commercialized woody is an illustration of ‘classic FTA economics astatine work’.“Because some economies specialise successful antithetic segments, tariff elimination works arsenic a cost-reduction instrumentality alternatively than a displacement shock. An India–EU FTA would frankincense present classical commercialized gains—higher volumes, deeper integration and stronger concern competitiveness connected some sides—at a infinitesimal erstwhile specified economically rational commercialized arrangements are becoming progressively rare,” says Ajay Srivastava.As GTRI notes, alternatively than competing with each other, the 2 economies inhabit antithetic positions wrong planetary worth chains. India mostly ships labour-intensive and processing-oriented products, portion the EU specialises successful superior equipment, blase technologies and concern intermediates.“This structural complementarity explains wherefore an India–EU escaped commercialized statement is apt to little costs and grow commercialized alternatively than endanger home industry,” says GTRI.In FY2025, merchandise commercialized betwixt the 2 sides crossed $136 billion, and reductions successful tariffs would chiefly easiness input costs, fortify value-chain linkages and boost commercialized volumes, delivering the accepted ratio gains associated with specified agreements for businesses and consumers alike.

Will India-EU FTA offset interaction of Trump tariffs?

Diversification of merchandise handbasket and geographies is cardinal to mitigating the interaction of US tariffs, accidental experts. So volition the India-EU FTA present connected that front?In a report, Emkay Research says, “...India–EU FTA comes astatine a important juncture—of planetary commercialized fragmentation, rising protectionism, US–India commercialized frictions, and heightened planetary uncertainty.

The woody could enactment arsenic an effectual counter-cyclical buffer by improving India’s export information successful planetary worth chains, expanding marketplace access, and supporting supply-chain diversification.”The EU accounts for astir 17% of India’s goods exports. Emkay Research estimates that a bilateral alignment could assistance India’s exports to the EU by astir $50 cardinal by 2031, led by medium-tech manufacturing.

Agneshwar Sen, Trade Policy Leader astatine EY India tells TOI, “The India - EU FTA’s worth lies beyond tariffs.

It volition supply predictable marketplace access, regulatory cooperation, and concern linkages. While strengthening Indian competitiveness, it whitethorn partially mitigate the trade-distorting effects of unilateral tariff actions elsewhere.”Sen points retired that the tariff concessions, portion an important constituent nether the India–EU FTA, volition not supply a like-for-like offset to the adverse interaction of the caller US tariff increase.“They tin surely and meaningfully cushion the daze successful immoderate sectors, but fixed the differences successful home regulations successful the EU arsenic compared to the US, wholesale redirection of commercialized from 1 marketplace to the different is improbable to happen. The US remains India’s largest single-country export market, nevertheless deeper entree to the EU—especially successful engineering goods, chemicals, textiles, car components and new-age sectors—will assistance diversify request and stabilise export growth,” helium adds.Gulzar Didwania, Partner astatine Deloitte India believes that the woody is apt to unfastened up the EU marketplace for India for assorted sectors specified arsenic textile, gems and jewellery, car components etc. “India exports a important magnitude of these items to the US which has been impacted owed to 50% tariffs. While the US is India’s largest trading spouse truthful far, this woody is apt to offset immoderate magnitude of interaction created by US tariffs connected Indian exports,” helium tells TOI.Gautam Khattar, Principal astatine Price Waterhouse & Co LLP says, “The EU commercialized woody offers a captious model for Indian exporters to diversify and de-risk proviso chains. Gaining preferential entree to a marketplace of this standard is simply a monolithic catalyst for labour-intensive sectors similar textiles and leather.” “In an epoch of accelerated geopolitical shifts, this isn't conscionable a commercialized agreement, it’s a strategical enlargement of India’s planetary footprint,” helium tells TOI.However, Ajay Srivastava of GTRI strikes a enactment of caution: “The archetypal acceptable of tariff cuts nether the India-EU FTA whitethorn footwear successful aft astatine slightest 1 year. But India’s exports to the US are already down by 21% betwixt May and Dec 2025. We anticipation that a US woody whitethorn hap soon, reducing US tariffs from 50 to 15%,” helium tells TOI.India is confronted with 1 of the astir demanding planetary commercialized backdrops successful caller memory. A surge successful protectionist policies crossed developed economies, softening worldwide request and the emergence of climate-related commercialized restrictions are each coming astatine a clip erstwhile India is seeking to accelerate export growth.

Instead of expansion, the near-term absorption is progressively connected preserving existing marketplace share.With this pact, the European Union becomes India’s 22nd escaped commercialized statement partner. Since 2014, the NDA authorities has concluded commercialized agreements with Mauritius, the UAE, the UK, EFTA, Oman and Australia, and has announced deals with New Zealand. In 2025, India signed commercialized agreements with Oman and the UK and confirmed the decision of negotiations with New Zealand.