Why the India–EU Trade Deal Is Really About Power, Not Tariffs

SYNOPSIS

The India–EU Free Trade Agreement, known as the “mother of all deals,” is less about tariffs and more about strategy. While it connects two billion people across the world’s second- and fourth-largest economies, its real purpose lies in managing geopolitical risk. Uncertainty in US trade policy and growing dependence on China have pushed both India and the EU to seek diversification and supply-chain resilience. The agreement expands market access for most Indian exports, benefits labour- intensive and MSME sectors, and deepens integration into European value chains. Overall, the FTA reflects a shift toward pragmatic partnerships in an increasingly multipolar global economy.

1.       In today’s global economy, trade is no longer separate from geopolitic.

2.       Tariffs, supply chains, and market access increasingly reflect strategic alignment rather than pure economic efficiency.

3.       The India EU Free Trade Agreement emerges from this reality, where managing dependence has become as important as promoting growth.

The long awaited India European Union Free Trade Agreement, often called the “mother of all deals,” is being framed as a breakthrough in market access. After 18 years of negotiations, it brings together two billion people across 27 European countries, linking the world’s second  and fourth largest economies. In simple terms, it creates an economic space of nearly USD 24 trillion, close to a quarter of global GDP.

Tariffs will fall on German automobiles. Indian textiles will enter Europe more easily. That much is obvious.

What matters more is why this deal happened now.

This agreement is not just about trade. It is geopolitical statecraft. It reflects how major democratic economies are adjusting to a world where trade is no longer neutral and economic dependence has become a vulnerability.

The timing makes this clear. What pushed the deal across the line in early 2026 was not a sudden convergence on tariff schedules, but external pressure. India has faced punitive US tariffs of up to 50%, linked to its continued purchases of Russian oil. The European Union, meanwhile, has spent years dealing with threats over steel, industrial subsidies, digital regulation and an uncomfortable dependence on China for critical supply chains.

Seen against this backdrop, the FTA looks less like liberalisation and more like insurance.

In scale, the agreement is unprecedented. India will offer tariff concessions across 92.1% of its tariff lines, covering 97.5% of EU exports. The EU, in turn, will grant preferential access across 97% of tariff lines, covering 99.5% of India’s exports by value. More importantly, over 70% of EU tariff lines covering more than 90% of India’s exports will move to immediate zero duty access.

For Brussels, the deal strengthens its push for strategic autonomy, reducing reliance on both the United States and China while deepening ties with a fast growing democracy. It also fits into a wider EU pattern that includes agreements with Japan, Indonesia, Mexico and South American partners.

For India, the logic is just as clear. As a rising economic power, it has little interest in being dependent on any single market. The EU agreement sits alongside India’s trade deals with Australia, the UAE, the UK, EFTA countries, Oman and New Zealand, signaling a shift from caution to confidence in trade diplomacy.

This is not a return to old style liberalization. The India–EU FTA is practical by design, focused on diversification, resilience and policy space. Tariffs matter, but supply chains matter more.

Textiles and apparel will enter the EU at zero duty across all tariff lines, opening a USD 263.5 billion import market, compared with India’s current exports of roughly USD 7.2 billion. Leather and footwear exports, valued at about USD 2.4 billion, benefit from the removal of tariffs as high as 17%. Marine products gain preferential access across 100% of trade value, targeting a USD 53.6 billion EU import market.

The agreement is not only about goods. It also strengthens the plumbing of trade. Customs cooperation, data sharing , simpler border procedures reduce friction and improve predictability.

Labour intensive MSME sectors such as textiles, leather, footwear, gems and jewelery, toys, sports goods and marine products, representing over USD 33 billion in exports, gain immediate zero duty access to the EU.

Higher up the value chain, the impact is just as significant. Engineering exports to the EU, currently around USD 16.6 billion, gain access to a market that imports close to USD 2 trillion worth of engineering goods each year. In chemicals, 97.5% of India’s export basket by value moves to 0 duty, improving access to a European import market worth roughly USD 500 billion.

Step back and the larger pattern becomes clear. As major economies try to de risk from both China and the United States, they are building a more flexible, multipolar economic order based on partnerships rather than blocs.

Ultimately, the India–EU FTA reflects a world in which old trade certainties no longer apply. By linking two of the world’s largest democratic economies, it reshapes trade flows while offering a counterweight to rising protectionism. Backed by European support for climate and industrial transition, it ties economic openness to resilience.

Quietly, in New Delhi and Brussels, the global economic order is being reshaped. And the message is clear: countries that invest in partnership, rather than isolation, will shape what comes next.

Anshi Faria