EU Signals Historic Trade Deal with India is Near Completion

EU Signals Historic Trade Deal with India is Near Completion

2026-01-20 economy

Davos, Tuesday, 20 January 2026.
EU leadership confirms the “mother of all deals” is imminent. This historic pact unites a market of two billion people, set to be finalized during India’s Republic Day celebrations.

Breakthrough at Davos

Speaking from the World Economic Forum in Davos today, January 20, 2026, European Commission President Ursula von der Leyen confirmed that the European Union and India are on the “cusp of a historic trade agreement” [1][6]. Describing the impending pact as the “mother of all deals,” she highlighted its potential to integrate a combined market of 2 billion people, representing nearly a quarter of global GDP [1][6]. This confirmation signals the conclusion of a decisive phase in negotiations that have spanned nearly two decades, setting the stage for a formal announcement in New Delhi later this week [1][2].

A High-Stakes Diplomatic Week

The finalization of the deal coincides with a significant diplomatic engagement. European Council President Antonio Costa and Commission President von der Leyen are scheduled to arrive in India on January 25 for a three-day State Visit [3][4]. The EU leadership will be accorded the honor of serving as Chief Guests at India’s 77th Republic Day celebrations on January 26 [1][3]. Following the parade, the 16th India-EU Summit will convene on January 27, where the conclusion of the Free Trade Agreement (FTA) negotiations is expected to be officially announced alongside a new security and defense partnership [3].

A Strategic Economic Alignment

The economic implications of this agreement are vast. For India, the deal secures preferential access to the European Single Market, a bloc comprising 27 member states with an estimated collective GDP of €18–22 trillion and 450 million consumers [2][7]. This agreement marks India’s ninth trade deal in just four years, following successful pacts with nations such as the UAE, Australia, and the UK [2][7]. The commercial relationship is already substantial, with bilateral trade reaching €120 billion in 2024 and EU foreign direct investment in India totaling $117.4 billion between April 2000 and September 2024 [3].

The timing of this rapprochement is geopolitically critical, occurring as global trade faces renewed protectionist pressures. The agreement is being finalized just as US President Donald Trump’s administration prepares to enforce new tariffs effective February 1, which include levies of 10% to 25% on EU goods and up to 50% on Indian exports [2][3]. In her address today, von der Leyen positioned the India-EU partnership as a counter-weight to isolationism, championing “fair trade over tariffs” and emphasizing the need to de-risk economies by diversifying supply chains [4].

Dismantling Trade Barriers

Structurally, the FTA aims to drastically reduce duties on goods. The EU is seeking the elimination of tariffs on over 95% of its exports, while India is prepared to liberalize approximately 90% of its tariff lines [7]. This liberalization is expected to aid European exporters who currently face high Indian duties, such as 35.5% on automobiles and components, and 10.4% on plastics [2]. Conversely, while Indian goods face a relatively low average EU tariff of 3.8%, key labor-intensive sectors like textiles and clothing encounter duties around 10%, which the deal aims to alleviate [2][7]. However, negotiators are still refining the final details on complex issues such as the Carbon Border Adjustment Mechanism (CBAM) and services mobility ahead of the January 27 summit [7].

Sources


Geopolitics International Trade