EU and India sign historic trade deal after 19 years, driven by Trump-era tensions

The European Union and India have concluded a sweeping free trade agreement, ending 19 years of negotiations that were repeatedly stalled by disagreements over market access, labor, and environmental standards. Dubbed the “mother of all deals,” the pact was finalized this week as both Brussels and New Delhi sought to counterbalance growing trade tensions with the United States under President Donald Trump.

A Deal Forced by External Pressure

Analysts say Trump’s aggressive and unpredictable trade policies acted as a catalyst, pushing both sides to compromise. “In India, they call it a ‘shotgun marriage,’ and the shotgun is held by Donald Trump,” said Heribert Dieter, a senior fellow at the German Institute for International and Security Affairs. The EU has faced tariff threats from Washington, while India was hit with 50% U.S. tariffs over its continued oil purchases from Russia.

Key Provisions and Economic Impact

Under the agreement, 96.6% of EU-origin goods will see tariffs eliminated or drastically reduced, saving European companies an estimated €4 billion annually. India will gradually cut its 110% car import duty to 10%, with an annual quota of 250,000 vehicles—a boost for European automakers like Mercedes-Benz and BMW. Agricultural tariffs will also be slashed, including reductions on European wines and olive oil, though sensitive sectors like beef and sugar are excluded. The deal also facilitates the movement of skilled Indian professionals to EU countries facing labor shortages.

Strategic and Infrastructure Dimensions

Beyond trade, the pact includes a new security and defense partnership covering maritime security, cyber defense, and counterterrorism. It is also expected to lend momentum to the proposed India-Middle East-Europe Economic Corridor (IMEEC), an alternative trade route linking Europe and India via the Middle East. Analysts stress the agreement signals a broader strategic alignment between two major economic powers committed to rules-based trade amid rising global protectionism.