In a landmark move, India and the European Union have finalized a free trade agreement, marking a pivotal shift in global trade dynamics. This agreement, hailed by European Commission President Ursula von der Leyen as the "mother of all deals," is set to open India's vast market to the EU's 27 member states, focusing on manufacturing and services sectors.

Geopolitical Context and Accelerated Talks

The trade negotiations, which had been stalled for two decades, gained momentum over the past six months. This acceleration was largely driven by the geopolitical landscape shaped by former US President Donald Trump's unpredictable trade policies. Trump's administration had imposed heavy tariffs on Indian goods, including a 50% tariff that penalized India's continued purchase of Russian oil. These tariffs, coupled with Trump's threats towards EU countries, prompted India and the EU to expedite their trade discussions.

Strategic Implications and Global Trade Relations

The EU, already India's largest trading partner with bilateral trade reaching $142.3 billion in 2024, sees this agreement as a strategic move to diversify its trade relations. The deal is the seventh trade agreement India has completed recently, reflecting a broader trend of countries seeking to mitigate the risks associated with US trade policies. Michael Kugelman, a senior fellow at the Atlantic Council, noted, "The Trump factor provided a very strong impetus to the deal because both India and the EU are facing shock US tariffs that they never expected."

Looking Beyond Trade

Beyond economic benefits, the agreement carries significant geopolitical weight. It signals a collective effort by global powers to protect themselves against unilateral US trade measures. The deal follows the EU's recent trade accord with the South American trade bloc Mercosur, which also faced delays due to similar geopolitical concerns.