by Rajnish Singh
The signing of the EU–India Free Trade Agreement (FTA) on 27 January 2026 in New Delhi marks a seismic shift in the geopolitical landscape, creating a free trade zone encompassing roughly two billion people and around 25 per cent of global GDP.
For a brief moment, it appeared that Brussels and New Delhi had outmanoeuvred Washington, leaving American business leaders wondering whether “America First” had inadvertently placed them last.
For years, the EU–India relationship lacked a clear geostrategic anchor. Yet the return of Donald Trump to the White House, and his renewed enthusiasm for tariffs, provided the necessary push. The EU and India already conduct over €180 billion in annual trade, supporting nearly 800,000 jobs in the EU alone. The new FTA is designed to double EU exports to India by 2032.
However, just six days after Brussels and New Delhi signed the “mother of all deals”, President Trump moved swiftly. On 2 February, he announced a framework for a bilateral “Interim Agreement” with India. Four days later, an Executive Order initiated the reduction of the punitive 50 per cent tariffs previously imposed on Indian goods, in retaliation for purchases of Russian oil, to a baseline of 18 per cent.
The contrast between the two arrangements is stark.
The EU–India FTA is a comprehensive, legally binding treaty providing substantial institutional integration. It eliminates 90 per cent of tariffs. Duties on EU cars will decrease from around 110 per cent to roughly 10 per cent. Industrial machinery, pharmaceuticals, textiles, wine and olive oil will all gain significant new market access.
Services liberalisation is equally substantial. Cross-border services trade reached €59.7 billion in 2023, nearly double its 2020 level. This is not a symbolic pact; it meaningfully restructures access between two economies seeking reliable partners in a world increasingly defined by US–China competition.
It is therefore unsurprising that Washington reacted quickly. Prime Minister Modi agreed “in principle” to purchase up to $500 billion in US goods over five years. Markets responded immediately: the Indian rupee recorded its largest one-day gain in seven years. India–US trade, worth $129.2 billion in 2024, has historically been more transactional than strategic. Under Trump, it became even more conditional, tied to energy purchases, defence alignment and broader geopolitical bargaining. Though tariff relief arrived swiftly, it was not without strings attached.
Brussels, by contrast, negotiated a rules-based agreement not contingent on India’s stance towards Moscow or Beijing. It is designed to last political cycles rather than reflect them. While the US–EU economic relationship remains far larger in absolute terms, it has grown increasingly fractious, strained by disputes over digital taxation, industrial subsidies and regulatory standards. Against that backdrop, the EU–India agreement represents deliberate strategic diversification.
The partnership also extends beyond trade. Alongside the FTA, Brussels and New Delhi signed a Security and Defence Partnership in January 2026, covering maritime security, cybersecurity, hybrid threats and crisis management. The Trade and Technology Council is advancing cooperation on artificial intelligence, semiconductors, clean technology and digital public infrastructure. This broader architecture reinforces the agreement’s durability.
This is where the EU-India FTA has an advantage over any potential US trade agreement: predictability. The EU offers a long-term, rules-based framework insulated from the political volatility of individual governments. Even as the rules-based international order has been challenged in recent years, the FTA provides institutional certainty.
The United States remains essential to both Europe and India, both economically and strategically. Under Trump, however, the risk of volatility may become a permanent feature of the relationship. The EU–India FTA, on the other hand, provides a steady basis for two markets that increasingly value predictability as a competitive advantage.
For investors and policymakers alike, the message is clear: Washington may move faster, but Brussels is building something designed to last.
By: N. Peter Kramer
