The “mother of all deals”: that’s how European Commission President Ursula von der Leyen described the new free trade agreement between the European Union and India, announced on Tuesday after about two decades of negotiations.
The deal will affect a combined population of 2 billion people across economies representing about a quarter of global GDP.
Speaking in New Delhi,von der Leyen characterised the agreement as a “tale of two giants” who ”choose partnership,in a true win-win fashion”.
So, what have both sides agreed to – and why does it matter so much for global trade?
What has been agreed
Under this agreement, tariffs on 96.6% of EU goods exported to India will be eliminated or reduced. This will reportedly mean savings of approximately €4 billion (about A$6.8 billion) annually in customs duties on European products.
The automotive sector is the big winner.European carmakers – including Volkswagen, BMW, Mercedes-Benz and Renault – will see tariffs on their vehicles gradually reduced from the current punitive rate of 110% to as little as 10%.
The reduced tariffs will apply to an annual quota of 250,000 vehicles, which is six times larger than the quota the UK received in its deal with India.
To protect India’s domestic manufacturers, European cars priced below €15,000 (A$25,500) will face higher tariffs, while electric vehicles get a five-year grace period.
And the deal keeps protections for sensitive sectors in Europe: the EU maintains tariffs on beef, chicken, dairy, rice and sugar. consumers in Delhi might enjoy cheaper European cars, while Europe’s farmers are protected from competition.
The Department of Foreign Affairs and Trade (DFAT) confirms negotiations are ongoing, aiming to deepen economic ties. India has eliminated tariffs on all Indian exports to Australia, and in turn, Australia has removed duties on 90% of Indian goods by value, an increase from an initial commitment of 85%. This reciprocal tariff reduction signifies a strengthening of the bilateral economic relationship. The Press Data Bureau of India announced the initial agreement in May 2023, detailing the scope of tariff concessions.
### EU-India Trade Agreement & its influence
The recent trade agreement between the EU and India is expected to encourage the finalization of the australia-India CECA. The European Commission’s trade page on India details the progress and objectives of the EU-India trade agreement, which focuses on reducing tariffs and non-tariff barriers. The EU deal demonstrates India’s willingness to liberalize trade, perhaps influencing its approach to negotiations with Australia on newer trade issues like labor and environmental standards. The 11th round of India-Australia negotiations, held in August 2023, covered these crucial areas.
### Pursuit of an Australia-EU Free Trade Agreement
Negotiations for a free trade agreement between Australia and the EU were renewed in June 2023 after a previous collapse in 2023. The Australian Parliamentary Library provides a detailed overview of the history and current status of the Australia-EU FTA. The EU’s success in establishing trade relationships with both India and Australia suggests a broader trend of countries adapting to American protectionism by strengthening partnerships with each other. As of January 29,2026,DFAT confirms negotiations are ongoing, with a focus on securing comprehensive market access and modern provisions.