India, EU slash tariffs on autos, spirits, textiles in landmark trade agreement

[NEW DELHI] India and the European Union (EU) have finalised a long-pending landmark trade deal, both sides said on Tuesday (Jan 27), as they seek to hedge against fickle ties with the United States.

The deal is expected to double EU exports to India by 2032 by eliminating or reducing tariffs in 96.6 per cent of traded goods by value, and will lead to savings of four billion euros (S$6 billion) in duties for European companies, the EU said.

The EU will cut tariffs on 99.5 per cent goods traded over seven years, with tariffs to be cut to zero on Indian marine goods, leather and textile products, chemicals, rubber, base metals and gems and jewellery, India’s trade ministry said in a statement.

“Yesterday, a big agreement was signed between the European Union and India,” Indian Prime Minister Narendra Modi said earlier. “People around the world are calling this the mother of all deals. This agreement will bring major opportunities for the 1.4 billion people of India and the millions of people in Europe.”

The accord would open up India’s vast and highly guarded market, with New Delhi slashing tariffs on cars to 10 per cent over five years from as high as 110 per cent, according to an EU statement, benefiting European automakers such as Volkswagen, Renault, Mercedes-Benz and BMW.

India is also slashing tariffs on alcoholic beverages like wines to 75 per cent immediately from 150 per cent, which would be lowered to 20 per cent gradually. Tariffs on spirits will be lowered to 40 per cent, the EU said.

The pact will also cut tariffs on a slew of EU goods coming to India including machinery, electrical equipment, chemicals and iron and steel, the EU announced.

“Europe and India are making history today,” European Commission President Ursula von der Leyen said in a post on social media. “This is only the beginning.”

Trade between India and the EU stood at US$136.5 billion in the fiscal year through March 2025.

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The formal signing of the India-EU deal would take place after legal vetting expected to last five to six months, an Indian government official aware of the matter has said. “We expect the deal to be implemented within a year,” the official added.

The agreement comes days after the EU signed a pivotal pact with the South American bloc Mercosur, following deals last year with Indonesia, Mexico and Switzerland.

During the same period, New Delhi finalised pacts with Britain, New Zealand and Oman.

The spate of deals underscores global efforts to hedge against trade with the US as President Donald Trump’s bid to take over Greenland and tariff threats on European nations test longstanding alliances among Western nations.

An India-US trade deal collapsed last year after a breakdown in communications between their two governments.

Talks between India and the EU were relaunched in 2022 after a nine-year lull, and gathered momentum after Trump put tariffs on several trading partners, including a 50 per cent tariff on goods from India.

For India, the tariff cuts with the EU will lead to more exports in labour-intensive sectors that will help partly offset the impact of US tariffs, said Ajay Srivastava, a former Indian trade official.

He added that the deal will also give an immediate price advantage for EU products in India because of relief from its high tariffs, for instance up to 110 per cent on cars. REUTERS