Trade has been openly weaponised in pursuit of political compliance with US policies.

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• This deal is about geopolitics as much as economics.

While the India–EU trade agreement covers a combined market of nearly $27 trillion and two billion people, its real driver is strategic anxiety in a world where trade has become a tool of coercion rather than cooperation.

• American unpredictability accelerated what economics alone could not.

After two decades of stalled talks, shock US tariffs under Donald Trump — imposed even on allies — pushed India and Europe to overcome long-standing differences and hedge against Washington’s volatility.

• Both India and the EU are quietly rebalancing away from overdependence.

For India, the deal reduces exposure to US pressure and helps diversify away from China and Russia; for Europe, it opens a vast alternative market and limits reliance on China amid supply-chain risks.

• The agreement is ambitious, but far from settled.

Ratification will be politically difficult in Europe, and unresolved issues — especially the EU’s carbon border tax — could create new asymmetries that test the pact’s credibility and fairness.

• At its core, the deal marks a philosophical shift for India.

Shaped by the trauma of the East India Company and decades of protectionism, India is cautiously embracing negotiated openness — not as surrender, but as a strategy to secure autonomy in a fractured global order.

For more read the full article ..... 

JANUARY 2026

The trade agreement between India and the European Union is often described as an economic milestone, but such a description is incomplete.

This deal is as much about geopolitics, strategic autonomy and a distressing global order as it is about tariffs, services and market access.

It reflects a world in which trade has ceased to be a neutral tool of commerce and economic growth and has instead become a weapon, a warning and a fence against uncertainty.

• भारत-ईयू (EU) व्यापार सौदा: कारोबार या भू-राजनीतिक सुरक्षा कवच ? 

The numbers alone explain why the agreement has drawn global attention.

The European Union is already India’s largest trading partner, with bilateral trade in goods touching $142.3 billion in 2024, accounting for around 11.5 percent of India’s total merchandise trade.

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Only few other bilateral arrangements outside the US–China command such scale.

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The EU, in turn, counts India as its ninth largest trading partner, a ranking that understates India’s future importance given its demographic scale, consumption growth and manufacturing ambitions.

Together, India and the EU represent nearly two billion people, a combined market of about $27 trillion and roughly a quarter of global GDP.

Only few other bilateral arrangements outside the US–China command such scale.

Why a Logical Deal Took Two Decades?

Yet for all this economic logic, trade negotiations between India and the EU remained stalled for nearly two decades.

Talks were launched in 2007, collapsed in 2013, and only resumed seriously in 2022.

The question, then, is not why the deal makes sense, but why it became possible now.

The answer lies less in economics and more in geopolitics.

The global trading system is no longer anchored in predictability, rule-based multilateralism or American stewardship.

Under President Donald Trump, the United States has repeatedly used tariffs not merely as bargaining tools but as punitive instruments against adversaries and allies alike.

• भारत-ईयू (EU) व्यापार सौदा: कारोबार या भू-राजनीतिक सुरक्षा कवच ? 

Trade has been openly weaponised in pursuit of political compliance with US policies.

India has been a direct target. The US has imposed tariffs of up to 50 percent on certain Indian exports, including an explicit 25 percent penalty linked to New Delhi’s refusal to stop purchasing Russian oil.

These measures have hit sectors ranging from steel and aluminium to engineering goods and chemicals, industries that employ millions and form the backbone of India’s export economy.

Europe has not been spared either.

Several EU member states faced sudden tariff threats after resisting Trump’s controversial proposal involving Greenland.

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Trade has been openly weaponised in pursuit of political compliance with US policies. 

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Though the threats were later withdrawn, they served as a reminder that alliances no longer guarantee economic security.

In such a climate, protecting against American unpredictability has become rational statecraft.

The India–EU agreement must be read against this backdrop.

When Trade Becomes a Weapon, What Can Partners Do?

It is no coincidence that it is the seventh trade deal India has concluded in a relatively short span, nor that Brussels has suddenly revived long-dormant negotiations elsewhere.

Earlier this month, the EU signed a trade accord with the Mercosur bloc after 25 years of talks, a deal widely seen as accelerated by fears of renewed American protectionism, even as it now faces legal and political resistance within Europe.

The same impulse is visible globally.

MERCOSUR, or the Southern Common Market, is a South American trade bloc established in 1991 to promote free trade, economic integration, and the free movement of goods, people, and currency among its member nations. 

Founded by Argentina, Brazil, Paraguay, and Uruguay, it serves as a major economic, political, and social integration process in the region. 

Canada’s Prime Minister Mark Carney recently warned of a “rupture” in the post-war international order and moved swiftly to reset trade ties with China, drawing immediate threats of 100 percent tariffs from Washington.

The UK, long cautious after Brexit, is now dispatching the Prime minister and senior ministers and business delegations to Beijing. This is despite serious allegations against China about spying and national security threats.

Across continents, governments are recalibrating, diversifying and preparing for a world in which the United States is no longer a stable economic anchor.

Fencing Against American Coercion and Chinese Dominance?

In this context, the India–EU deal carries significance far beyond customs schedules. It signals that major powers are willing to club together to reduce vulnerability to unilateral coercion.

The “Trumpology”, as we call it, provided a decisive threat, pushing both sides to set aside long-standing disagreements on issues such as data localisation, public procurement and intellectual property, postponing them rather than allowing them to derail the entire agreement.

• भारत-ईयू (EU) व्यापार सौदा: कारोबार या भू-राजनीतिक सुरक्षा कवच ? 

This explains the unusually strong political language surrounding the deal.

Prime Minister Narendra Modi and European Commission President Ursula von der Leyen described it as “the mother of all deals”, framing it as a civilisational partnership rather than a transactional bargain. 

Von der Leyen explicitly invoked the language of security, arguing that reducing strategic dependencies was essential in an era when trade itself had become a weapon.

The agreement is positioned as a blueprint for shared prosperity and resilient supply chains, as the global order being in “great turmoil”

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Ursula von der Leyen described it as “the mother of all deals”...

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On the other side, Washington accused the EU of “financing the war against themselves” by deepening trade ties with India, referring to India’s continued purchase of Russian crude.

This charge reflects a fundamental divergence in worldview.

India has consistently argued that affordable energy is a developmental necessity, not a geopolitical endorsement, and that its oil purchases help stabilise domestic inflation for a population of 1.4 billion people.

For India, abrupt economic decoupling from Russia would carry unacceptable social and strategic costs.

Indeed, India’s historic relationship with Moscow remains a critical association.

Russia continues to supply a significant share of India’s defence hardware, though that dependence has been steadily declining. 

The EU deal strengthens India’s parallel effort to diversify defence procurement, particularly through deepening ties with France and exploring cooperation with other European manufacturers.

For Europe, India represents not just a market but a long-term strategic partner capable of absorbing industrial capacity and reducing overdependence on China.

China, in fact, looms quietly but persistently over the agreement.

Both India and the EU see value in balancing Beijing’s dominance in global trade and manufacturing. India once hoped to pursue that balance through closer alignment with the United States.

The EU, too, explored a similar path.

That strategy now appears less viable. The India–EU pact reflects a recalibration rather than a realignment, an attempt to build alternative centres of economic gravity.

What Are The Challenges?

None of this, however, should obscure the substantial challenges that remain.

The agreement is still subject to legal finalisation and ratification by the European Parliament and national legislatures, a process that could take years.

The EU’s experience with the Mercosur deal is reflective of the issues like environmental concerns, farmer protests and domestic politics threatening to derail ratification.

Substantively, several fault lines persist. Intellectual property rules, agricultural market access, labour standards and digital governance remain sensitive.

• भारत-ईयू (EU) व्यापार सौदा: कारोबार या भू-राजनीतिक सुरक्षा कवच ? 

Above all, the EU’s Carbon Border Adjustment Mechanism (CBAM) poses a serious risk.

From January 1, EU imports will be taxed based on embedded carbon emissions. 

As the CBAM has not been adequately addressed in the FTA, Indian exports could continue to face carbon taxes even as EU goods enter India with reduced or zero tariffs.

Delhi-based think tanks warn that this could institutionalise an asymmetry that undermines India’s manufacturing competitiveness.

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... EU’s Carbon Border Adjustment Mechanism (CBAM) poses a serious risk...

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Yet despite these concerns, business sentiment on both sides is broadly supportive.

European industry groups see India as one of the few large markets still capable of sustained demand growth.

Indian exporters, battered by US tariffs and global slowdown, view Europe as a stabilising alternative.

Implementation, as Business Europe has noted, will determine whether ambition translates into outcomes.

From the East India Company to Equal Partners: Has India Truly Outgrown History?

Beyond economics and geopolitics lies a deeper story about India’s evolving relationship with trade itself. For much of its modern history, India has viewed openness with suspicion.

This instinct was not irrational.

The East India Company arrived not as a conquering army but as a trading enterprise, weaponising commerce to dismantle sovereignty.

Colonial rule entrenched a belief that free trade, when imposed by unequal power, is merely exploitation by another name.

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... Colonial rule entrenched a belief that free trade...

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Post-independence India responded with protectionism, state planning and import substitution. These policies built industrial capacity but also bred inefficiency and isolation.

The 1991 reforms marked a rupture, but not a complete conversion to free market.

India’s approach since then has been cautious, selective and often contradictory, opening sectors while shielding others, embracing globalisation rhetorically while fearing its social consequences.

The India–EU deal suggests a subtle but significant philosophical shift. It reflects a growing confidence that engagement need not mean subjugation, that openness can be negotiated rather than endured.

Unlike the era of the East India Company, India enters this agreement as an equal sovereign actor, shaping terms rather than accepting them.

• भारत-ईयू (EU) व्यापार सौदा: कारोबार या भू-राजनीतिक सुरक्षा कवच ? 

Protectionism is no longer abandoned out of ideological surrender but recalibrated in pursuit of resilience.

This is not the end of Indian caution, nor should it be.

Trade, like power, must be managed. But the drift away from reflexive protectionism marks a recognition that isolation is no longer safety, and that in a fractured world, strategic partnerships offer better insurance than self-imposed walls.

The India–EU trade deal, then, is not merely about tariffs or markets. It is about history, memory and choice. It reflects a country that once learned the dangers of trade through conquest, now choosing trade as a tool of autonomy.

Whether that choice succeeds will depend not just on ratification or compliance, but on whether India can finally reconcile its colonial past and experience with East India Company with the current demands of an unsettled future.