A huge trade deal went through between the European Union (EU) and the nation of India last week. As stated by the Guardian this trade deal has been in the works for the last 20 years now and is set to be the biggest trade deal in Indian history, being cited as the “mother of all deals.” This deal will link two of the world’s largest economies, covering both 25% of the world GDP and a third of the world’s trade.
The deal has come about due to the high tariff war seen throughout the world as the United States continues to throw tariffs on countries around the world regardless of allegiances. The deal would look to reduce the tariffs between the two economic blocks in order to better facilitate and not impede trade between them. Reuters states that the EU will look to reduce or cut tariffs on about 95% of goods being imported from India, and India will cut tariffs on around 93-99% of goods. This will exclude farming goods to not put local food producers at risk of foreign competition.
The tariffs will be reduced on a steady decline taking place over the coming years, with some industries taking around a decade or longer to fully reduce to zero. As stated in AP News, this is to give each market time to adapt and react to the changing influence of each other, and to not have a complete collapse in either economy.
The specific markets set to be impacted by this deal will be the automotive industries, large labor-intensive manufacturing industries such as machinery, chemicals and services industries. BBC reported that the tariffs on European automotive industries from India will drop from 110% to 10% and finally 0% in just 5-10 years, significantly boosting European influence and sales in the nation. Along with this the large service market in India will see a spike in activity as they further expand into the continent sized market.
The impact of this deal is immense as newsrooms like Associated Press predict a large spike as both partners will most likely double their exports to each other, if not greater. Along with this European companies will also be saving large amounts avoiding the costly tariffs from other countries. This will also help to greatly diversify both countries’ trade networks as the entire global trade system further evolves amidst growing political and economic impacts.
President Donald Trump and the White House have yet to make an official statement as of the signing of the deal, however the Treasury Secretary Scott Bessent has made public criticisms towards the deal. CNBC states that Bessent has asserted the US has done more for the EU than any other country and has affirmed that the high tariffs put on India were only there as retaliation for their use of Russian gas during invasion of Ukraine. His claim is one of shock and betrayal at the two-trade partner’s deal regardless of the further deterioration between the relationships the US has with either.
However, India’s Minister of Petroleum and Natural Gas Hardeep Singh Puri told CNBC that he still believes that the United States and India will remain in high relation with each other, with hopes of a new trade deal coming in the future. Still it is left undetermined as the tariffs and the further aggressiveness of the U.S. foreign policy continue to drive longtime allies away, these trade deals between them will only continue to grow as countries new and old compete to fill the vacuum left by the American giant.
