• The deal sends a ‘strong signal for global middle powers committed to rules-based trade,’ analyst says

• India’s labor-intensive exports – including textiles, gems and pharmaceuticals – are set to benefit, while EU gains are expected in automobiles, beverages, food and scientific equipment

ISTANBUL

The EU and India unveiled what they dubbed “the mother of all deals” this week – a long-delayed free trade agreement clinched amid mounting strain in both sides’ economic ties with the US.

Against a backdrop of tariff disputes, trade frictions and growing uncertainty over US trade policy under President Donald Trump, Brussels and New Delhi moved to lock in deeper economic and strategic cooperation after nearly two decades of stalled negotiations.

The agreement includes sweeping tariff cuts on goods ranging from automobiles and wines to textiles and footwear, alongside a new security and defense partnership and a pact establishing a comprehensive mobility framework.

“In India, they call it a ‘shotgun marriage,’ and the shotgun is held by Donald Trump,” Heribert Dieter, a senior fellow at the German Institute for International and Security Affairs, told Anadolu.

Analysts say Trump’s aggressive and unpredictable trade posture accelerated a deal that had languished for 19 years, forcing both sides to compromise amid fears of growing protectionism from Washington.

‘Strong signal for global middle powers’

Negotiations on an EU-India free trade agreement began in 2007 but were suspended in 2013 over disputes on market access, regulatory standards and labor and environmental provisions. Talks were revived only in 2022, as geopolitical and economic pressures intensified.

Dieter said the EU had long approached negotiations with what he described as a “superiority complex,” expecting India to adopt European norms – an approach New Delhi resisted as it emerged as a major global power.

“And then came the deal maker, Donald Trump,” he said. “Both India and the EU are suffering from Trump’s erratic trade policy, and that helped them to forge this deal.”

Dieter said the bloc has been humiliated by Trump and is now scrambling to find new partners. Earlier this year, the EU also struck a long-delayed free trade agreement with the South American trade bloc Mercosur.

“We have seen in 2025 that the EU has been punching below its weight,” Dieter said.

Amitendu Palit, a senior research fellow and lead for trade and economics at the Institute of South Asian Studies at the National University of Singapore, echoed that assessment, pointing to rising frictions with Washington on both sides.

Trump imposed 50% tariffs on Indian goods, citing New Delhi’s continued oil purchases from Russia. The EU, meanwhile, was hit with a 15% tariff, followed by threats – later revoked – of additional levies on European states opposing Trump’s proposed acquisition of Greenland.

“US unilateral 50% tariffs on India have hurt several industries,” Palit told Anadolu. “Politically too, both India and the EU have developed certain differences with the US.”

He said the deal marks the beginning of a broader shift, demonstrating that countries with historically divergent trade positions can still forge mutually acceptable rules for global commerce.

“This is a strong signal for global middle powers committed to rules-based trade,” he said.

Infrastructure and security links gain momentum

Beyond trade, analysts say the agreement strengthens prospects for infrastructure cooperation, particularly the India-Middle East-Europe Economic Corridor (IMEEC), a proposed alternative trade route linking Europe and India via the Middle East.

“You need infrastructure to do trade,” Dieter said. “That corridor between India and Europe through the Middle East would make more sense if there were more trade.”

He noted that the IMEEC proposal has still not taken off, but large-scale infrastructure investment is already visible across India.

Palit said the deal should be seen as part of a broader strategic alignment.

“The EU-India agreement should not be looked at as an isolated trade deal,” he said.

He pointed out that India and the EU also formalized a security and defense partnership, which aims to boost cooperation in areas including maritime security, cyber defense, counterterrorism and emerging domains such as space.

The partnership reflects growing geopolitical instability and the need for closer coordination among like-minded actors, according to the EU.

Palit also highlighted parallel initiatives on innovation, scientific cooperation and mobility, which he said reinforce the strategic depth of the relationship.

Who benefits most from the deal

Under the agreement, customs duties on 96.6% of EU-origin goods will be fully eliminated or reduced to symbolic levels, generating estimated annual savings of about €4 billion ($4.7 billion) for European companies.

An analysis by the Kiel Institute for the World Economy estimates the deal could boost GDP on both sides by around 0.13% annually, with bilateral trade – which exceeded $136 billion in 2024-2025 – targeted to surpass $200 billion by 2030.

India’s 110% import duty on cars will be gradually cut to 10%, with an annual quota of 250,000 vehicles introduced to protect domestic producers – a move expected to benefit struggling European automakers including Mercedes-Benz, BMW and Volkswagen.

Tariffs of up to 44% on machinery and chemicals will largely be scrapped within 10 years, while duties on aircraft and spacecraft will fall to zero over a decade, and within five years for most items.

In agriculture, average EU food and farm export duties – currently above 36% – will be sharply reduced. India’s 150% tariff on European wines will drop to 20%, beer duties will be lowered, and olive oil tariffs eliminated within five years.

Sensitive EU agricultural sectors such as beef, chicken, rice and sugar are excluded, while Indian exports will continue to face strict EU health and safety standards.

The deal also aims to ease the movement of skilled Indian professionals to EU countries facing labor shortages, particularly Germany, by streamlining visas and cutting red tape.

Palit said India’s labor-intensive exports stand to gain significantly.

“Textiles, garments, leather, handicrafts, gems and jewelry, and pharmaceuticals will benefit a lot,” he said.

The EU’s biggest gains, he added, are expected in automobiles, beverages, food products and scientific equipment, as well as services such as professional, IT, transport and communications.