India, EU announce free trade deal amid Trump tariff tensions

After nearly two decades of on-again, off-again negotiations, the European Union and India have announced a landmark trade deal as both sides look to deepen ties amid tensions with the United States.

“We have reached the most important agreement,” European Commission President Ursula von der Leyen said in a post on X after meeting Indian Prime Minister Narendra Modi in Delhi. He called the deal “historic.”

It will allow free trade in goods between the 27-nation bloc of European countries and the world’s most populous nation, which together account for nearly 25% of global gross domestic product and a market of two billion people.

The agreement is expected to significantly reduce tariffs and expand market access for both parties.

Von der Leyen and European Council President Antonio Costa were in Delhi to meet Modi at a bilateral summit.

The European Commission said the deal would eliminate export tariffs on most chemicals, machinery and electrical equipment, as well as aircraft and spacecraft, following phased reductions. It is worth noting that under the 250,000 vehicle quota, the current high 110% motor vehicle tariff will be reduced to 10%.

The agreement aims to reduce the cost of European products such as automobiles, machinery and agri-food products entering India after lowering import duties. Sensitive agricultural sectors including dairy and sugar were excluded.

Brussels said the deal would support investment flows, improve European market access and deepen supply chain integration.

“This is a historic agreement,” Modi said. “It will make it easier for Indian farmers and small businesses to access European markets. It will also boost manufacturing and services. It will promote innovation partnerships.”

The deal comes as both India and the EU deal with economic and geopolitical pressure from the United States.

Negotiations between India and the United States aimed at reaching a trade deal continue to drag on, with Delhi grappling with the 50% tariffs imposed by President Donald Trump last year.

Last week, Trump threatened to escalate a trade war with European allies over his opposition to the U.S. takeover of Greenland. Back.

This larger geopolitical context is evident in recent statements from leaders.

On Tuesday, von der Leyen wrote: “We have created a free trade area with a population of two billion from which both sides will benefit. This is just the beginning. We will make our strategic relationship even stronger.”

Costa’s day before explainWithout naming the United States, he said the trade deal would send an “important political message to the world that India and the EU believe more in trade deals than tariffs” at a time when protectionism is on the rise and “some countries have decided to raise tariffs.”

Von der Leyen and Costa arrived in Delhi over the weekend and were chief guests at India’s colorful Republic Day celebrations on Monday.

The two leaders posed for photos with Modi on Tuesday and the goodwill between the two was palpable.

The deal may not be formally signed until it is approved by the European Parliament and the European Council later this year.

In addition to the trade agreement, India and the EU are also advancing negotiations on security and defense cooperation and climate action respectively.

Indian Defense Minister Rajnath Singh said on Tuesday that he had discussed a range of bilateral security and defense issues with European Commission Vice President Kajal Karas, including opportunities to integrate supply chains to build a credible defense ecosystem and develop future-proof capabilities.

Reuters reported that the two sides are working on a draft security and defense partnership covering areas such as maritime security, cyber threats and defense dialogue.

“This is a perfect example of partnership between the world’s two major economies… The agreement accounts for 25% of global GDP and one-third of global trade,” Modi said at the opening of the India Energy Week conference on Tuesday.

EU is India’s largest trading partner in goods bilateral merchandise trade It will reach $136bn (£99.4bn) in 2024-25, almost doubling in a decade.

Negotiations for a deal between India and the EU began in 2007 but stalled in 2013 due to hurdles in market access and regulatory requirements. Discussions will officially resume in July 2022.

The main sticking points are India’s auto market access, agricultural products and carbon-related tariffs – analysts will be reading the fine print to see what the final deal says about these issues.

Over the past few days, officials from both sides have worked hard to finalize unfinished chapters of the agreement in an effort to complete it before the visit of EU leaders.

The deal comes as pressure mounts on Delhi and Brussels to secure alternative markets for exporters.

Major trade deals signed with India in the past seven months U.K.Oman and New Zealand, the 2024 agreement signed with the four-nation European Free Trade Association group of Switzerland, Norway, Iceland and Liechtenstein has entered into force.

At the same time, the European Union Sign trade agreement Talks with South American trade bloc Mercosur were held earlier this month after 25 years of negotiations.

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