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

The India-EU free trade agreement (FTA) might just sweeten a bit, thanks to the US’ heavy-handedness against the European Union. US President Donald Trump has vowed to impose 10 per cent tariffs on Denmark, Sweden, France, Germany, the Netherlands and Finland, along with Britain and Norway from February 1, rising to 25 per cent on June 1, till the US is allowed to buy Greenland. 

This has naturally not gone down well with the EU that might retaliate with its ‘Anti-Coercion Instrument’, which permits curbs on investments and services against a third country that puts economic pressure on the member countries for a policy shift.

According to a report in The Economic Times, trade watchers believe that the EU now has an added incentive to deepen trade ties elsewhere, including India, which is in the final leg of negotiations with the union. 

Sanjay Jain, managing director of TT Ltd told the daily that the EU might now want to hasten the operational part of the deal. The deal is also likely to work out better, he said.

INDIA-EU FTA

Commerce and Industry Minister Piyush Goyal described the impending India-EU free trade agreement as the "mother of all deals". The negotiations are in their final stage, with the announcement of the agreement's conclusion expected on January 27, coinciding with the state visit of top EU leadership to India.

The deal is anticipated to offer significant mutual benefits and marks a major development in India's international trade engagements. Goyal said it will be good and mutually beneficial for both sides, as well as a "super deal" for Indian export sectors.

According to Commerce Secretary Rajesh Agrawal, India and the EU are "very close" to concluding negotiations on the proposed agreement. Ongoing discussions aim to resolve the remaining issues so the deal can be announced during the visit by 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 United States, with Indian exporters facing tariffs as steep as 50 per cent. The agreement with the EU is expected to help Indian exporters diversify their shipments and reduce dependence on China.

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

The agreement will be India's largest trade pact, covering 27 developed EU nations such as France, Germany, Spain, and Italy. Since 2014, the Indian government has finalised seven trade pacts, including those with Australia, the UK, Oman, New Zealand, the UAE, the EFTA bloc, and Mauritius.