India and EU clinch the 'mother of all deals' in a historic free trade
agreement
[January 27, 2026] By
RAJESH ROY and SAM McNEIL
NEW DELHI (AP) — After nearly two decades of negotiations, India and the
European Union announced Tuesday they have reached a free trade
agreement to deepen economic and strategic ties. The accord — dubbed the
“mother of all deals” — could impact as many as 2 billion people.
The deal is also one of the biggest bilateral engagements on commerce
and comes as Washington targets both India and the EU with steep import
tariffs.
“This agreement will bring major opportunities for the people of India
and Europe,” India's Prime Minister Narendra Modi said in a virtual
address to an energy conference. “It represents 25% of the global GDP
and one-third of global trade.”
India and the EU also agreed on a framework agreement for deeper defense
and security cooperation, and a separate pact aimed at easing mobility
for skilled workers and students, signaling their partnership extends
beyond commerce.
US pressure propels India-EU trade deal
Speaking at a joint news conference in New Delhi with European
Commission President Ursula von der Leyen and European Council President
António Costa, the Indian leader said the partnership with the EU “will
strengthen stability in the international system” at a time of ”turmoil
in the global order.”
Washington is targeting both India and the EU with steep tariffs,
disrupting established trade flows and pushing major economies to seek
alternate partnerships.
The negotiations for the India-EU deal got a new impetus after U.S.
President Donald Trump’s strong-arm tactics over tariffs and Greenland.
“Europe and India are making history today. We have concluded the mother
of all deals,” von der Leyen said in a post on X.
In a speech later, she said the accord was a tale of “two giants” — the
world’s second and fourth largest economies — “who chose partnership, in
a true win-win fashion.” She also said it sends "a strong message that
cooperation is the best answer to global challenges.”
The deal, further integrating supply chains and strengthening joint
manufacturing power, will also cut up to 4 billion euros ($4.7 billion)
in annual tariffs for exporters and create jobs for millions of workers
in India and in Europe.
Deal to cut tariffs and ease regulatory barriers
A formal signing of the deal could come later this year after a legal
scrubbing of the text while it is expected to go into effect sometime
early next year, after ratification by the EU Parliament.
India is expected to reduce or eliminate tariffs for 96.6% of EU
exports, while Brussels will reciprocate with similar reduction covering
nearly 99% of India’s shipments by trade value in a phased manner,
according to statements from both sides.
India's sectors poised to gain from the deal include textiles, apparel,
engineering goods, leather, handicraft, footwear and marine products
while the EU’s gains will be in wine, automobiles, chemicals and
pharmaceuticals, among others.
A quota system for automobiles, wines and whisky has been agreed on,
bringing down steep duties.
[to top of second column] |
Indian Prime Minister Narendra Modi, center, welcomes European
Council President Antonio Costa, left and European Commission
President Ursula von der Leyen before their meeting in New Delhi,
India, Tuesday, Jan. 27,2026. (AP Photo/Manish Swarup)
 The European Commission said tariffs
charged by India on cars will gradually go down from 110% to as low
as 10%, while they will be fully abolished for car parts after 5-10
years. Tariffs ranging up to 44% on machinery, 22% on chemicals and
11% on pharmaceuticals will also be mostly eliminated, it added.
On European wine, the tariffs in India would come down from 150% to
20% for the premium range.
New Delhi has excluded from the deal dairy products such as milk and
cheese along with cereals citing “domestic sensitivities” about
those products. The EU for its part won’t allow concessional tariffs
on imports of Indian sugar, meat, poultry and beef products,
officials at Indian Trade Ministry said.
Offsetting impact of higher US tariffs
India is looking to diversify its export destinations as part of a
strategy to offset the impact of higher U.S. tariffs, including an
extra 25% levy on Indian goods for its unabated purchases of
discounted Russian oil, bringing the combined tariffs imposed by the
United States on its Asian ally to 50%.
For the EU, the deal offers the bloc expanded access to one of the
world’s fastest-growing major economies, and helps European
exporters and investors reduce their reliance on more volatile
markets.
Bilateral trade between India and EU stood at $136.5 billion in
2024-25. The two sides hope to increase that to about $200 billion
by 2030, Indian officials said.
“Ultimately, the agreement is about creating a stable commercial
corridor between two major markets at a time the global trading
system is fragmenting,” said Indian trade analyst Ajay Srivastava.
The EU is still reeling from the aggressive approach of its
once-stalwart ally across the Atlantic. There’s a widespread sense
of betrayal across the 27-nation bloc from Trump’s onslaught of
higher tariffs, embrace of far-right parties, and belligerence over
Greenland.
Brussels has accelerated its outreach to markets around the world.
Over the past year, von der Leyen has signed deals with Japan,
Indonesia, Mexico, and South America under the catchphrase
“strategic autonomy,” which in practice is akin to decoupling from a
U.S. seen by most European leaders as erratic.
___
McNeil reported from Brussels.
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