India and the EU have reached a landmark trade deal that will slash tariffs on most goods, open up previously restricted sectors, and boost two-way trade. The agreement includes phased cuts on EU cars and alcoholic beverages in India, zero duties on key Indian exports, and is expected to double EU exports to India by 2032.
India and the European Union signed a long-awaited trade agreement on 27 January 2026 at the 16th EU-India summit in New Delhi that will significantly reduce tariffs on most goods, aiming to boost bilateral trade and reduce reliance on the US amid global trade tensions.
The deal is expected to double EU exports to India by 2032 by eliminating or cutting tariffs on 96.6% of traded goods by value, resulting in estimated savings of EUR 4 billion for European companies.
European Commission President, Ursula von der Leyen, said: “The EU and India make history today, deepening the partnership between the world’s biggest democracies. We have created a free trade zone of 2 billion people, with both sides set to gain economically. We have sent a signal to the world that rules-based cooperation still delivers great outcomes. And, best of all, this is only the start – we will build on this success, and grow our relationship to be even stronger.”
Trade between India and the EU stood at USD 136.5 billion in the fiscal year through March 2025, slightly higher than India’s trade with the US (USD 132 billion) and China (USD 128 billion).
The formal signing of the agreement will follow legal vetting, which is expected to take five to six months.
Opening up previously restricted sectors
The deal will gradually open India’s highly protected market, particularly for automobiles and alcoholic beverages.
Tariffs on cars imported from the EU will immediately be reduced to 40% for vehicles priced over EUR 15,000 (USD 17,739) and will eventually fall to 10% over five years. This move is expected to benefit European automakers, including Volkswagen, Mercedes-Benz, BMW, and Renault.
Similarly, tariffs on wines will drop from 150% to 75% immediately, then gradually to 20%, while tariffs on spirits will decrease to 40%.
Other EU exports, such as machinery, electrical equipment, chemicals, iron, and steel, will also see reduced duties. However, Indian companies remain subject to the EU’s Carbon Border Adjustment Mechanism (CBAM), which currently applies to steel, cement, electricity, fertilisers, and other products.
Tariff reductions and exclusions
The EU will cut tariffs on 99.5% of goods imported from India over a seven-year period. Tariffs will be reduced to zero on Indian marine products, leather, textiles, chemicals, rubber, base metals, gems and jewellery. Certain agricultural products—including soy, beef, sugar, rice, and dairy—remain outside the agreement.
The breakthrough comes after nearly 2 decades of EU-India trade negotiations and follows US tariffs on some Indian goods, which prompted New Delhi and Brussels to accelerate discussions.
