EU and India Conclude Trade Talks, Seeking Trump Alternatives

Article content

(Bloomberg) — The European Union and India are set to announce an agreement on a long-awaited trade deal on Tuesday, forging closer economic ties to hedge against US President Donald Trump’s tariffs.

Article content

European Commission President Ursula von der Leyen and European Council President Antonio Costa are in New Delhi to mark the moment, which caps almost two decades of negotiations.  

Article content

Article content

The conclusion of negotiations after years of halting talks reflects the rapidly shifting global alignment under Trump.

Article content

Article content

The EU, despite long clashing with Indian officials over trade matters, is now focused on shedding its economic reliance on the US and China. India is similarly trying to shake its protectionist reputation and offset a 50% Trump tariff, while at the same time balance its ties with Russia.

Article content

Article content

Nations are increasingly willing to “bury the hatchet” given the “atmosphere of uncertainty” around Trump’s policies, said Amitendu Palit, the research lead on trade and economics at the Institute of South Asian Studies.

Article content

“Diversification is absolutely essential,” he added. “That is the name of the game.”

Article content

The agreement would lower tariffs on most consumer and industrial goods traded between India and EU members, although it’s expected to exclude some agricultural products. The EU would also get enhanced market access for its car exports subject to a cap.

Article content

The pact is expected to be formally signed after legal vetting, which will likely take around six months. The European Parliament will also have to ratify it.

Article content

Tuesday’s announcement comes only days after the EU finally polished off a separate, long-gestating trade deal with the Mercosur bloc of South American countries — another pact meant to help the EU pivot away from the US and China. EU lawmakers have yet to ratify that deal, however.

Article content

Article content

Indian Prime Minister Narendra Modi is similarly trying to find new markets for a country Trump once dubbed the “tariff king.” Tuesday’s agreement marked Modi’s fourth trade deal since last May, following pacts with the UK, Oman and New Zealand. 

Article content

Next up, Modi is seeking partnerships with the Mercosur bloc, Chile, Peru and the Gulf Cooperation Council, hoping to secure strategic resources and increase India’s global footprint.

Article content

Export Boost

Article content

The EU-India deal could give India, Asia’s third-largest economy, a competitive edge in the export of labor-intensive goods hit hard by Trump’s sky-high tariffs, including apparel and footwear. 

Article content

More broadly, it could boost the country’s exports to the EU roughly $50 billion (€42.2 billion) by 2031, according to a report by Madhavi Arora, lead economist at Emkay Global Financial Services Ltd. Arora singled out pharmaceutical, textiles and chemicals as sectors likely to benefit. 

Article content

For the EU, the agreement would mean access to one of the world’s fastest growing economies, with a market of over 1.4 billion people. But the deal will not offer as much market access for European goods as the one the EU recently reached with the Mercosur countries — Argentina, Brazil, Uruguay and Paraguay.