EU, India set to sign free‑trade pact to challenge “a fractured world”

Brussels – “We are showing a fractured world that another way is possible.” This is the path taken by European Commission President Ursula von der Leyen, who has travelled to India to sign another important free trade agreement tomorrow, following the controversial EU-Mercosur deal. In an international context of protectionism and tariffs, the European Union is seeking to diversify its allies in response to the United States’ aggressive protectionist policies. 

With the lengthy negotiations with the four Mercosur countries (almost) concluded, the Commission President is now looking to India. The economic pact would open up a market of 1.5 billion inhabitants to European producers, lowering trade tariffs on 90 per cent of traded goods. Strategic sectors such as automotive, chemicals, and plastics will be involved. According to reports from The Times of India, in addition to the likely signing of the trade deal, EU representatives will also sign documents for a stronger partnership on security issues, mobility, and a global strategic agenda for the period 2026-2030.

Today we join India in celebrating Republic Day.

Our partnership is built on a shared goal to tackle the world’s greatest challenges.

As we look forward to tomorrow’s EU-India Summit, we are ready to take our next step together. pic.twitter.com/7Ud8Qsnvto

— European Commission (@EU_Commission) January 26, 2026

What is in the pact?

Today, 26 January, the President of the Commission (wearing a golden Indian dress) and the President of the European Council, Antonio Costa, are attending the Republic Day parade in New Delhi with full honours. After the celebrations, however, tomorrow will be handshake time. On the table, the agreement is expected to include a reduction in tariffs from 110 per cent to 40 per cent on 12-star cars, as well as reductions in tariffs in sectors such as car components, plastics production, and wine trade. 

Left out of the deal, however, is the agri‑food sector, a key sticking point in the agreement with Mercosur. New Delhi has instead requested exemptions from European climate rules, such as the Carbon Border Adjustment Mechanism (CBAM), and does not intend to recognise agri-food certifications on European food products.

Low tariffs on automotive products and wines

To date, the state governed by Narendra Modi is already the EU’s main trading partner in goods: bilateral trade in 2024-25 amounted to 136 billion euros (exports to the EU worth 76 billion euros, imports from the EU worth 60 billion).

Trade between the two economic powers, although already significant, could increase by 30-40 per cent, at least according to studies carried out by the EU. 

The benefits for EU producers could be more significant in sectors such as the automotive industry: EU cars have a market share of only 5 per cent, while in the wine sector (which is growing strongly in India), European producers export less than they do to Iceland due to very high tariffs. Yesterday, President von der Leyen described the agreement as “the highest level of access ever granted to a trading partner in the traditionally protected Indian market.”

Geopolitics and contradictions

Today’s visit has both geopolitical and economic significance. With the agreement’s ratification, the EU could outstrip China and the US in trade relations with India, while also strengthening defence ties with a key ally in the Pacific Ocean. There are contradictions in this regard. In fact, Modi remains one of Russian President Vladimir Putin‘s best friends, thanks to a supply of low-cost hydrocarbons from Siberia. It is safe to say that Modi himself is one of the main financiers of Russia’s war against Ukraine.

Picture released from the Modi-Putin meeting in India pic.twitter.com/AIlqsYxTTW

— Visegrád 24 (@visegrad24) December 4, 2025

In any case, after Trump’s harsh measures and his arrogant remarks against long-standing partners and friends, the EU is attempting to diversify its partners. To use the words of Canadian Prime Minister Mark Carney in Davos: this trade agreement represents a first victory for the “middle powers.”