How India and the EU are Responding to the Changing World Environment
Introduction
The global rules-based order has taken a hit from Trump tariffs, foreign policy intransigence, and “America First” policy. As the global rules-based order frays and the European Union (EU) finds its footing, it is signing trade agreements with countries and regions to insulate its supply chains from tariffs, expand new markets, and support economic prosperity grounded in shared values.
The multilateral trading systems are under growing threat from tariffs and geopolitical tensions. The EU- India trade agreements offer a clear example of how multilateralism still works, driven by a need for both parties to leverage and improve their trading relationship and the need to adapt to a new world order where the U.S. does not play an active role.
In the last decade, bilateral trade between the EU and India has doubled. EU imports have grown by 140%, while exports grew by a slower pace of 58% (Figure 1).
Figure 1: EU -India Trade in brief
Whats’s in the EU-India Trade Agreement?
Labelled by the President of the European Commission as the “Mother of all deals”, the EU-India agreement was signed at a time when India just overtook Japan as the fourth largest economy in the world. Bilateral trade in goods and services between the EU and India is estimated at €180 billion (£155 billion), and this agreement will double it by 2030.
The newest free trade area represents around a quarter of the world’s population and covers 25% of world's GDP.
It illustrates how the EU is adapting to global realities by pursuing a mix of free trade strategies and economic security. Rather than become inward-looking, the EU is seeking bilateral agreements with strategic partners, joining india who signed a trade agreement with the United Kingdom (UK) in July 2025. While any traditional trade deal focuse son imports, exporta nd investment, this trade agreement goes beyond.
Geopolitics, not classical liberalism, is driving the global trade agenda
While the EU appreciates the benefits of free trade, it would be incomplete to view the current trade agreement through the lens of classical liberalism alone. If one looks back to the early 1990’s and early 2000s, trade agreements such as Nafta and the EU focused on reducing tariffs and boosting efficiency gains. The EU-India deal, however, is being driven by a need to adapt to the post-U.S.-led world order. The shifting geopolitical sands, U.S. trade policy uncertainty, and its ability to weaponise supply chains have pushed the EU and India to agree on a trade agreement faster.
The EU-India Trade Deal Comes at a Great Time
The EU — India trade talks began in 2007, but negotiations gained momentum in 2025 after President Trump slapped 25% of tariffs on India, which caused shudders in their Trump/Modi relationship. As momentum with the India-EU trade picked up, the U.S. redcued india tariffs to 18%. However, the damage was done, and the EU -India trade deal is positive for consumers who will benefit from lower prices, but it equally sends a strong signal to the U.S. that the world is trading as it departs from global norms and institutions that have undergirded trade since the end of World War II.
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It is one-sided to blame U.S tariffs as entirely populist and driven by a need for autarky that is unlikely to be successful in the U.S. Where the U.S. should have investe din technology to reduce the impact of the manufacturing wage differential with China, it gave huge tax cuts that provided a “sugar high” to the economy. The story is more complicated than India and the EU responding to Trump. They both have huge imbalances with China ansd Beijing’s push to become self-reliant will only increase this. However, their agreement is going to cover economic, technological, and strategic objectives.
Global trade isn’t protectionist, U.S. trade is!. This agreement provides an opportunity to recalibrate trade alignment and boost supply chians across Asia, Europe and the Atlantic.
The EU is Worrid About China, and you should be too
China wants to become self-sufficient, and whether the rest of the world pursues some form of autarky or risks becoming hoke don China. See how dependent the world has become on rare earth metals? The EU is diversifying, especially because 21% of EU imports came from China in 2024, while only 8% of EU exports went to China in the same period. But we cannot all bash China for its innovation or state-driven form of capitalism. We should focus on making market-based systems work better.
When the EU complains about its trade deficit with China, it should imagine what most African countries think of their trade with the bloc. Yes, the EU-China trade deficit has reached a whopping €304 billion (£264 billion), but one trade deal will not correct years of regulatory inertia and innovations that are too slow to diffuse into the markets. For India, the agreement guarantees market access to Indian firms at a time of rising trade uncertainty — especially after its relations with the US were damaged following Trump’s threat of 500% tariffs.
So What is in the EU-India Trade Deal?
I will summarise five key points from this trade agreement. This is completely arbitrary, but this is what I think is worth remembering.
- The EU-India trade deal eliminates tariffs on textiles and apparel, creating a reliablemarket for Zara and H&M, while allowing them to source and potentially produce in India. It is cheaper to produce in India than in China as wages are rising, creating a unique opportunity to develop India’s textile sector and support European fast-fashion.
- The pharmaceuticals sector in India will benefit even though EU tariffs are already low. The agreemnt allos then to achieve stronger intellectual property frameworks that will integrate Indian producers into the European healthcare value chains.
- There is a renewed focus on climate cooperation, driven by India’s target to produce 500 gigawatts of renewable energy by 2030. We can expect further cooperation in solar, wind, grids, and green hydrogen.
- The deal removes tariffs on goods that are not yet granted to other partners. Cars from the EU will see tariffs lowered from 110% to 10% while machinery, chemicals, and pharmaceuticals will see lower rates of 44%, 22%, and 11% respectively. However, EU car producers only hold 3% of the market, with Japanese car brands dominating — Hyundai and Suzuki. But it is nonetheless a strong signal for Europeans to sell more cars to Indians.
- Tariffs on wine have been reduced from 150% to 20%, olive oil from 45% to 0%, and tariffs on bread and confectionery will be eliminated to zero. Both countries have included safeguards for their agricultural sector.
Conclusion
The EU is open for business, but this free trade agreement is not about classical liberal values. It is about improving the security of supply chains, derisking from the U.S. and China, and creating new markets for producers. This deal illustrates the market access is now shaped by changing geopolitics in reaction to a more erratic and uncertian global world order.
