The ‘Mother of All Deals’: How the India–EU Trade Pact Could Reshape Global Commerce
By Aswin Anil | January 29, 2026
When European Commission President Ursula von der Leyen called the newly announced India–EU free trade agreement the “mother of all deals,” it wasn’t political exaggeration. After nearly 20 years of stalled negotiations, the two sides have unveiled one of the most consequential trade pacts of the decade — one that reaches far beyond tariffs and trade flows.
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The agreement links economies representing almost a quarter of global GDP and touches the lives of roughly two billion people. At a moment when global trade is fragmenting, the deal signals that major democracies are still willing to bet on cooperation.
What Exactly Has Been Agreed?
Under the agreement, India will eliminate or significantly reduce tariffs on 96.6% of goods imported from the European Union. For European exporters, this translates into roughly €4 billion in annual customs savings.
The automotive sector stands out as the biggest winner. Import tariffs on European vehicles — once as high as 110% — will be reduced to as low as 10%, subject to an annual quota of 250,000 cars. This quota is far more generous than what India offered the UK in its post-Brexit trade deal.
India has also agreed to slash tariffs on machinery, chemicals, pharmaceuticals, wine, and spirits — opening its vast consumer market to high-value European goods while carefully shielding lower-priced vehicles and domestic manufacturers.
What Europe Is Offering India
The EU, in return, will eliminate tariffs on 99.5% of goods imported from India. This includes labour-intensive sectors such as textiles, leather goods, seafood, gems and jewellery, handicrafts, and toys — areas where India holds strong competitive advantages.
For Indian exporters squeezed by rising US tariffs, access to Europe offers a crucial alternative market at a time of global uncertainty.
What the Deal Leaves Out
Despite its scale, the agreement avoids binding commitments on labour rights, environmental protection, and climate policy. While it references carbon border adjustment mechanisms, it stops short of enforceable climate standards — a notable departure from recent EU trade deals.
Europe has also retained protections for sensitive agricultural products such as beef, dairy, sugar, and rice, reflecting domestic political realities within the EU.
Why This Deal Happened Now
Three forces drove this breakthrough. First, both India and the EU are actively diversifying trade partnerships amid global economic instability.
Second, renewed American protectionism has played a decisive role. With the US imposing steep tariffs on both Indian and European goods, the deal provides an economic safety valve.
Third, both sides are wary of trade diversion — particularly Chinese goods flooding alternative markets after being locked out of the US.
A Strategic Signal to the World
While commercially significant, the agreement is also deeply strategic. Its announcement came even before all technical details were finalised — suggesting that signalling unity mattered as much as substance.
The message is clear: when faced with economic pressure, major economies are choosing deeper cooperation over isolation.
Why It Matters Beyond India and Europe
For countries like Australia, the deal raises expectations. It shows India’s growing openness to tariff liberalisation and may accelerate stalled negotiations elsewhere.
More broadly, the India–EU pact highlights a shift in global trade — away from reliance on a single dominant market and toward diversified, rules-based partnerships.
In a fractured global economy, the “mother of all deals” may come to symbolise something larger: a collective effort to keep global trade alive.
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