India and EU Set Deadline for Free Trade Deal as Trump’s Tariff Threats Loom
- MGMMTeam
- Mar 1
- 2 min read
India and the European Union agreed on Friday to finalize a free trade agreement by the end of the year, marking their first commitment to a deadline after years of negotiations. The move aims to mitigate the impact of U.S. tariff hikes.
The announcement came during a joint press conference by European Commission President Ursula von der Leyen, who was on a two-day visit to India, and Indian Prime Minister Narendra Modi.
Both sides have been striving for years to reach a trade pact, which would require significant concessions from India, one of the world's most protected economies.
Negotiations for the India-EU free trade agreement resumed in 2021 after an eight-year hiatus.
"We have prepared a blueprint for collaboration in the areas of trade, technology, investment, innovation, green growth, security, skilling and mobility," Modi stated that officials have been instructed to finalize the deal by year-end.
The European Union is India's biggest trading partner in goods, with bilateral trade surging by approximately 90% over the past decade, reaching $137.5 billion in the 2023/24 fiscal year.
European Commission President Ursula von der Leyen advocated for a "bold" trade and investment agreement encompassing sectors such as batteries, pharmaceuticals, semiconductors, clean hydrogen, and defense.
Her visit, alongside leaders from EU nations, takes place amid escalating geopolitical tensions and as U.S. President Donald Trump has warned of imposing reciprocal tariffs on all countries, including the EU and India, by April.
"We both stand to lose from a world of spheres of influence and isolationism, and we both stand to gain from a world of cooperation and working together," she stated before her discussions with Modi. "But I believe this modern version of great-power competition is also an opportunity for Europe, and India, to reimagine its partnership."
The deal won't be easy
The deal faced years of delay due to New Delhi's hesitation to reduce tariffs in certain sectors, while the European Union was unwilling to relax visa restrictions for Indian professionals.
The EU is pushing for India to cut tariffs exceeding 100% on imported cars, whiskey, and wine, whereas India seeks better access for its affordable pharmaceuticals and chemicals in the EU market.
Additionally, India aims for lower tariffs on its textile, garment, and leather exports. It also opposes the EU’s plan to impose tariffs ranging from 20% to 35% on high-carbon goods—such as steel, aluminum, and cement—starting in January 2026.
"It won't be easy to conclude the free trade talks unless India agrees to drastically cut tariffs on automobiles and other products that could hit the domestic industry," said Ajay Srivastava, of Delhi think-tank Global Trade Initiative.
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