Will EU US tariff war sweeten India’s FTA with Europe? Here’s what we know

The India-EU free trade agreement may improve slightly, thanks to the US crackdown on the EU. US President Donald Trump has pledged to impose 10% tariffs on Denmark, Sweden, France, Germany, the Netherlands and Finland, along with Britain and Norway, starting on February 1, rising to 25% on June 1, until the United States is allowed to buy Greenland.

Naturally, this has not gone down well with the EU which may retaliate with the “anti-coercion instrument”, which allows restrictions on investments and services to be imposed against a third country that exerts economic pressure on member states to change policy.

According to a report in the Economic Times, trade observers believe that the European Union now has an additional incentive to deepen trade ties elsewhere, including India, which is in the final stage of negotiations with the bloc.

Sanjay Jain, managing director of TT Ltd, told the newspaper that the EU may now want to accelerate the operational part of the deal. He added that a better deal was also likely to be reached.

Free Trade Agreement between India and the European Union

Commerce and Industry Minister Piyush Goyal described the impending free trade agreement between India and the European Union as the “mother of all deals”. The negotiations have reached their final stage, and the agreement is expected to be announced on January 27, coinciding with the official visit of the EU high leadership to India.

The deal is expected to deliver significant mutual benefits and represents a major development in India’s international trade commitments. Goyal said it would be good and beneficial for both sides, as well as being a “great deal” for India’s export sectors.

According to Commerce Minister Rajesh Agrawal, India and the European Union are “very close” to concluding negotiations on the proposed agreement. The ongoing discussions aim to resolve the remaining issues so that the deal can be announced during the visit of the President of the European Council and the President of the European Commission later this month.

The FTA comes amid global trade disruptions due to high tariffs imposed by the US, with Indian exporters facing steep tariffs of up to 50 per cent. The agreement with the European Union is expected to help Indian exporters diversify their shipments and reduce dependence on China.

The EU market accounts for about 17 per cent of India’s total exports. In 2024-25, India’s bilateral trade in goods with the EU stood at $136.53 billion, with exports at $75.85 billion and imports at $60.68 billion, making India the largest goods trading partner in the EU.

The agreement will be India’s largest trade agreement, covering 27 developed countries in the European Union such as France, Germany, Spain and Italy. Since 2014, the Indian government has finalized seven trade agreements, including those with Australia, the United Kingdom, Oman, New Zealand, the United Arab Emirates, the European Free Trade Association bloc, and Mauritius.