The India-EU Free Trade Agreement

On 27 January 2026, in New Delhi, Narendra Modi and Ursula von der Leyen announced something that had been "almost finalised" for so long it had become a running joke in trade policy circles: the conclusion of the India-EU Free Trade Agreement, after negotiations that began in 2007, stalled in 2013, and were only relaunched in 2022.

The scale is genuinely unusual

This creates a free trade zone of nearly 2 billion consumers and roughly $24 trillion in combined GDP, about a quarter of global output and, per the European Commission, a third of global trade. Von der Leyen called it "the mother of all trade deals." That's marketing language, but the underlying numbers back up the size claim even if they say nothing about how smoothly implementation will go.

Who gains what

The EU will eliminate or reduce tariffs covering 99.5% of India's exports by value, with over 70% duty-free from day one, a direct lifeline for Indian textiles, leather, marine products, and gems and jewellery, sectors that have been squeezed by 50% US tariffs this year. In the other direction, India will cut tariffs covering 96.6% of EU exports by value, with the headline concession being automobiles: India's punishing 110% tariff on imported cars will step down to as low as 10% over several years, and tariffs on auto parts disappear entirely over 5–10 years. European wine, whisky, and processed agricultural products also get preferential access for the first time.

What didn't get resolved

The EU's Carbon Border Adjustment Mechanism (CBAM), a tariff on the carbon content of imports like steel and aluminium, remains fully intact despite Indian objections, though Brussels has pledged $590 million to help Indian exporters cut emissions ahead of CBAM taking fuller effect. That's a live friction point: India argues CBAM functions as a backdoor tariff that undercuts the spirit of a "free" trade agreement, and the compensation on offer is a fraction of the compliance cost Indian steel and aluminium exporters expect to face.

The geopolitical subtext

Both sides were explicit about the timing. Von der Leyen framed it as Europe "choosing cooperation" at a moment when trade is "being weaponised" elsewhere, a clear if indirect reference to the tariff environment coming out of Washington. For India, the deal is a hedge: a second major market opening precisely as the US relationship has grown more transactional. The text still needs European Parliament consent and ratification by India's Parliament before it takes legal effect, the announcement marks the end of negotiation, not the start of implementation.