EU and
India close ranks against Trump and Xi to seal trade deal
American
tariff coercion and China’s export dominance push Brussels and New Delhi to
wrap up elusive accord.
January
27, 2026 7:45 am CET
By
Camille Gijs
NEW DELHI
— The EU and India talked on and off for nearly 20 years about doing a trade
deal, but it took Donald Trump’s tariff coercion and China’s export dominance
to push them into finally achieving a breakthrough.
Brussels
and New Delhi celebrated a landmark accord Tuesday to open markets spanning 2
billion people and accounting for more than a fifth of global GDP — with Europe
gaining greater access for its autos and alcohol, and India winning concessions
on pharmaceuticals and services.
“Friends,
today, India has concluded the largest ever free trade agreement in its
history,” said Prime Minister Narendra Modi, a day after hosting EU leaders for
the annual Republic Day parade in New Delhi — a first for the 27-nation bloc —
ahead of a trade and defense summit.
“There
comes a time when history tells us this was a turning point. This is when the
moment took a new direction, when a new era began,” Modi told reporters,
standing alongside European Commission President Ursula von der Leyen and
European Council President António Costa.
Von der
Leyen reciprocated: “This is a tale of two giants,” she said. “Two giants who
choose partnership, in a true win-win fashion. A strong message that
cooperation is the best answer to global challenges.”
The
agreement, which marks the culmination of nearly a year of intensive talks,
represents a significant geopolitical win for von der Leyen. It comes after her
trade agenda suffered a heavy hit last week when the European Parliament
stalled the ratification of a long-sought pact with the Latin American Mercosur
bloc.
The
Mercosur deal has faced intense opposition from farmers in countries such as
France and Poland. The accord with India strikes a different balance, with both
sides preferring to take small steps on agriculture while developing
opportunities in key sectors like the automotive industry.
India,
known for its protectionist leanings and skilled negotiators, posed a tough nut
to crack for the Commission team. Preferring to more or less hit a year-end
deadline set by von der Leyen and Modi in New Delhi last February, the two
sides dialed back their ambitions to take the deal that was within reach.
“The EU
has had to settle for less than what it was hoping to obtain, and so we’ve
agreed to some modest outcomes in certain areas. However, we've been careful to
do that in a reciprocal manner,” said an EU official, briefing on condition of
anonymity as is customary in Brussels.
After
ties between India and the U.S. hit a low point last August, when Trump imposed
a 50 percent tariff on its exports, the imperative to get a deal done overcame
the inhibitions that had lingered for so long. The two sides have been in
on-off talks since 2007.
“Both
know that they need each other like never before and in this fractured world,
where trusted partnerships are very, very hard to come by,” said Garima Mohan,
a senior fellow at the German Marshall Fund in Brussels who leads the think
tank’s Indo-Pacific program.
What’s in
it
Under the
deal, New Delhi will lower tariffs on European cars and wine, while the EU
signaled it would assist Indian companies with decarbonization and negotiate
duty-free quotas for Indian steel. Economists at the Kiel Institute estimate
that the accord could lift EU exports to India by up to 65 percent and add more
than a tenth of a percent to GDP on both sides.
India
will gradually slash tariffs on European cars, reducing them from 110 to 10
percent on 250,000 cars every year.
A range
of European agricultural goods will also see their tariffs drop, reassuring the
lawmakers and farmers who have staged a fightback against the Mercosur accord
over fears of cheap competition from Latin America.
India
will lower tariffs on wine to between 20 and 30 percent from 150 percent now,
depending on value. European olive oil will also enter duty free into India,
instead of facing a 45 percent tariff.
The
stickiest issues relate to steel and the EU’s new carbon border tax: New Delhi,
a major steel exporter, wanted to make sure that its metals wouldn’t be
impacted by an upcoming 50 percent EU tariff on steel, and the carbon levy that
has just entered force.
In
response to those concerns, the EU plans to give India a significant share of
the 18.3 million metric tons of steel that can enter duty-free into the bloc.
Brussels will renegotiate those quotas in the coming months, as is required
under global trade rules, therefore India’s own share still has to be agreed
upon.
“There
will of course be a difference in how you treat this negotiation on application
of steel measures between FTA and non-FTA partners. Therefore I think it was
strategic from both sides that we have the agreement now and that India will be
treated as an FTA partner,” EU trade chief Maroš Šefčovič told POLITICO.
On the
carbon border tax, a new levy on carbon emissions that has irked countries such
as the U.S. and Brazil, Brussels will “help Indian operators to have a smooth
introduction of CBAM with all the technical assistance and all the additional
advice we can provide,” Šefčovič added, stressing that the Commission would
treat all its partners equally.
Indian
Commerce Minister Piyush Goyal acknowledged that patience would be needed on
steel.
“We have
agreed in good faith to work together towards a very preferential treatment as
a free trade agreement partner,” Goyal told reporters after the summit talks,
saying a satisfactory agreement could take six to eight months to achieve.
Jordyn
Dahl contributed to this report.
This
story has been updated.
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