India and the EU finally concluded the free trade agreement after nearly twenty years of negotiations. While its win of negotiations that spanned two decades, the timing of the deal matters more than ever at a time when the world is grasping for ways to manage the tariff chaos evoked by the Trump administration. This deal came together because India and the EU chose to work around their differences, given the added urgency of the current geoeconomic environment. This reflects two things. One, how India and the EU (major economies) are reorganising their trade in a world which accepts that the US may not be dependable. None of this means that either India or the EU is turning away from the US. But it does mean that neither is organising its economic future around American stability anymore. Second, in this current reality, the cost of disagreement is high among non-US trading partners. That’s why, despite the differences, an FTA between Brussels and India made more sense now than ever.
India’s exports to the EU in 2024-2025 were around US$ 76 billion, and imports at US$ 60 billion. The EU will remove tariffs on more than 90 per cent of its tariff lines, while India will do the same for 86 per cent, covering over 90 per cent of trade value on both sides. Along with that, both sides will partially liberalise a significant number of additional lines, bringing the overall coverage of trade liberalisation to 96.6 per cent in India and 99.3 per cent in the EU. India’s sectors such as fisheries, chemicals, textiles, footwear and pharmaceuticals would gain significant market access through this deal. In the current scenario of 50 per cent tariffs on Indian exports to the US, the damage is concentrated in sectors such as textiles, leather, footwear, and light manufacturing that relied on the US market for 30 per cent or more of their exports. Given the clear overlap, some of these exports might be rerouted to the EU under this deal.
While the EU might not be able to replace the US market immediately, it does something just as important under these conditions: it creates an alternative channel before firms are pushed out altogether. For instance, by cutting tariffs on leather and footwear from 17 per cent to zero, the agreement opens a viable destination for exporters who lost competitiveness overnight in the US. The most important lesson here is how both India and the EU chose to go around the areas of sensitivity and differences. The agricultural provisions of the deal reveal how carefully this balance was struck. India agreed to reduce or eliminate tariffs on certain EU agri-food products, such as olive oil, processed foods, fruit juices, and alcoholic beverages, while retaining firm protections for staples and politically sensitive sectors, such as dairy. The EU, for its part, protected its own agricultural red lines while granting India preferential access to products where India is competitive and employment-heavy, such as tea, coffee, spices, processed foods, fruits, and vegetables. This is a good starting point to see how India can do calibrated liberalisation in agricultural products where it is globally competent, to expand its export prospects.
The same pragmatism is visible in how the two sides handled the EU’s Carbon Border Adjustment Mechanism (CBAM). CBAM had remained a major point of friction for India, seen as a unilateral trade barrier disguised as climate policy. Instead of allowing this dispute to derail negotiations, the agreement has provisions on forward-looking most-favoured nation assurance extending flexibilities if any granted to third countries under the regulation, technical assistance, recognition of carbon pricing mechanisms, and financial support signal a shift from confrontation to engagement.
This is the essence of the world minus one moment. It is not the end of American economic leadership. But it is evidence that the world is preparing for its absence from the global stage. India and the EU have shown what this looks like in practice by following a new set of negotiation principles. First, accept or protect domestic political constraints, as this fastens the pace of negotiations. Second, liberalise where it strengthens competitiveness in the rerouted markets, such as by reducing tariffs on textiles, which helps improve global competitiveness and reduces input costs. And lastly, find ways to quickly work around the differences, as that’s better than a perfectly aligned but extensively delayed free trade deal.
However, to manage India’s growth ambitions in this new geopolitical reality, India also has to ensure it aligns with EU market standards to reduce entry costs. To improve India’s FTA utilisation rate, India needs to lower domestic costs, improve logistics, and reduce regulatory friction to build a more export-friendly domestic ecosystem. More than ever, India needs more FTAs to navigate this new world.