European Council President António Costa and European Commission President Ursula von der Leyen will headline India’s Republic Day on Monday. Their trip prioritises sealing a major free trade deal with Asia’s third-largest economy, beyond the ceremonial events. This comes as Europe navigates tensions with U.S. President Donald Trump over his recent trade war threats.
India’s guest selection signals a push for diverse global partnerships despite Washington’s 50% tariffs on its goods.
The pact may be announced on 27 January. Von der Leyen and India’s Piyush Goyal call it the “mother of all deals” after two decades of talks. It marks India’s ninth FTA in four years, following deals with the UK, Oman and New Zealand; the EU builds on pacts with Mercosur, Japan and others.
“Both sides now seek reliable trade partners, as threats arising out of the geopolitics have created a tumultuous environment for commerce. The urge is equally strong—for India to offset U.S. tariff issues, and the EU to offset trade dependence on China which it considers unreliable,” says Sumedha Dasgupta of the Economist Intelligence Unit.
She notes it shows “a continuing and significant effort to shed India’s notoriously protectionist carapace.”
India’s economy, fourth-largest globally and set to top $4 trillion GDP this year, draws EU interest. Von der Leyen said at Davos it would create a two-billion-person market worth a quarter of world GDP. The deal revives GSP benefits lost in 2023.
“India exported about $76 billion of goods to the EU while importing $61 billion, earning a trade surplus, but the withdrawal of EU GSP benefits in 2023 eroded competitiveness for many Indian products,” says Ajay Srivastava of GTRI.
“An FTA would restore lost market access, lower tariffs on key exports such as garments, pharmaceuticals, steel, petroleum products and machinery and help Indian firms better absorb shocks from higher U.S. tariffs,” Srivastava adds.
India shields agriculture and dairy, with phased cuts for cars, wine and spirits. “India’s proclivity has been to adopt a phased approach towards negotiating trade deals by moving more politically-sensitive issues into subsequent rounds of negotiation. In doing so, the geopolitical symbolism of the deal is as important as the economic substance,” Bajpaee says.
Europe seeks stronger IP and data rules; India resists the new CBAM carbon tax. The CBAM “effectively acts as a new border charge on Indian exports, even if import duties are eliminated under the FTA,” Srivastava warns, hitting MSMEs hard.
“Ultimately it could expedite trade decoupling from the U.S. and other unreliable partners,” says Alex Capri of the National University of Singapore.
India’s cut in Russian oil buys may ease EU approval amid U.S. frictions. “Political friction with the U.S. since early 2026 means that EU leaders will now be more welcoming towards this trade deal than they would have otherwise been,” Dasgupta says.