US' moves accelerating India's free trade deal with the EU?

The current executive order for 25 per cent reciprocal tariffs on Indian exports to the US, coupled with mounting demands on India to cut Russian imports, slash agricultural duties and liberalise digital and pharmaceutical markets, have triggered a strategic recalibration of India’s global trade strategy.

India has firmly resisted these demands, citing its longstanding strategic ties with Russia and the imperative to safeguard domestic economic priorities. Further signalling a pivot away from costly US defence deals, India declined America’s offer to purchase F-35 stealth fighter jets—reinforcing its preference for joint development and indigenous production under the ‘Make in India’ initiative.

Trump’s broader rhetoric—branding BRICS as anti-American and pressuring EU allies to increase energy imports—has further galvanised India and the EU to deepen their cooperation.

The proposed FTA is increasingly being viewed not merely as an economic pact, but as a strategic counterweight to American protectionism.

Diversification amid volatility

India’s parallel efforts to pursue trade agreements with other partners—such as the recently signed India-UK CETA (Comprehensive Economic and Trade Agreement)—underline a broader diversification strategy to buffer against US trade shocks.

These agreements aim to secure reliable market access, create employment in labour-intensive sectors like apparel, chemicals and automotive, and advance India’s integration into global supply chains.

India-EU FTA

The India-EU FTA, currently under negotiation phase, encompasses 23 chapters covering trade in goods and services, investment protection, digital trade, geographical indications (GIs), sustainable development, intellectual property rights (IPR), sanitary and phytosanitary (SPS) standards, professional mobility, customs facilitation, and dispute resolution.

Negotiators have adopted a phased approach—fast-tracking areas such as market access, investment facilitation and customs procedures, while taking more time to resolve complex issues like agriculture, sustainability and data regulation.

Key EU demands include lower tariffs on vehicles, medical devices, wine, spirits and meat. India, on the other hand, is seeking preferential treatment for its pharmaceuticals, electrical machinery, petroleum products and textiles and readymade garments.

Bilateral trade

In 2024–25, goods trade between India and the EU reached $136.3 billion, with Indian exports at $75.7 billion and imports at $60.6 billion. Services trade stood at $51.45 billion in 2023.

The EU accounts for nearly 17 per cent of India’s exports, making it India’s largest trading partner in goods, while India represents 2.2 per cent of the EU’s global trade.

Defining global pact

European Commission president Ursula von der Leyen has called the India-EU FTA “the largest trade deal of its kind” and a defining partnership of this century. During her landmark visit to New Delhi in February 2025, she and Prime Minister Narendra Modi reaffirmed their goal of finalising the agreement by year-end, while deepening cooperation on trade, defence, and connectivity.

Amid unilateral tariffs and global fragmentation, the India-EU deal is becoming more than an economic milestone—it is a diplomatic and strategic realignment. It marks a shift away from transactional, coercive diplomacy towards a balanced, rules-based partnership grounded in shared interests and mutual respect.

For India, the agreement would enhance its stature in a multipolar world while reinforcing ties with democratic allies. For the EU, it offers a crucial hedge against both Chinese economic expansion and unpredictable US trade policy—especially in key sectors like green energy, artificial intelligence and semiconductors.

As both partners accelerate talks to finalise the deal by December 2025, the India-EU FTA could become a blueprint for fairer, more inclusive global trade.

ALCHEMPro News Desk (CG)