The trade deal between India and the European Union is as much about geopolitics as it’s about intercontinental business relations.
The EU is already India’s largest partner with trade in goods reaching $142.3bn (£104.07bn) in 2024, amounting to 11.5% of the South Asian nation’s total trade. India is the EU’s ninth largest trading partner.
These are impressive numbers and reflect strong relations. And yet, trade talks were stuck for two decades.
That raises the question: what’s changed now? The answer lies in the fast-evolving geopolitical landscape and the unpredictability of the US administration under President Donald Trump.
The US leader has used tariffs as a bargaining chip in some negotiations but he has often used them to punish countries, including partners, which don’t agree with his worldview.
The US has imposed 50% tariffs on Indian goods, which include a 25% penalty for Delhi’s refusal to stop buying oil from Russia.
Some EU countries recently faced fresh tariff threats from Trump as the US president was put out by their refusal to accept his proposed takeover of Greenland. He later withdrew the threat, but experts say it did rattle the EU.
The EU and India are not alone in looking to hedge their bets when it comes to the US – the free trade agreement (FTA) in Delhi was secured amid a flurry of countries striking deals and patching things up as they try to cope with global unpredictability.
The EU-India pact – the seventh trade deal India has completed recently – comes after Brussels signed a trade accord with South American trade bloc Mercosur earlier this month after 25 years of negotiation. Experts say the Trump factor helped speed that up too, though it’s now facing legal challenges in Europe.
Canadian Prime Minister Mark Carney – who warned of a “rupture” in the post-war international order last week – is just back from a visit resetting ties in China which will boost trade ties, drawing Trump’s ire and fresh threats of 100% tariffs. Carney is also due to travel to India in the near future, with trade high on the agenda. UK Prime Minister Keir Starmer is heading to Beijing this week, accompanied by dozens of British business executives, following years of strained ties with China.
BBC
