India and EU Seal Landmark Trade Deal, Slashing Tariffs on Autos, Textiles and More

By benadeta mwaura - Reporter

Kenya, January 27, 2026 - After nearly two decades of negotiations, India and the European Union (EU) have finalised a landmark trade agreement that will sharply reduce tariffs on a broad range of goods and deepen commercial ties between the world’s largest democracy and the 27 member European bloc.

The deal, described by leaders on both sides as historic, is expected to significantly expand trade, enhance market access, and reshape global economic linkages amid shifting geopolitical dynamics. Under the agreement, the EU will eliminate or lower tariffs on about 96.6 % of goods traded by value, a move that could potentially double EU exports to India by 2032 and save European companies an estimated €4 billion ($4.75 billion) in annual duties.

India will reciprocate by reducing EU tariffs on nearly 99.5 % of its exports to the bloc over the next seven years, broadening access for Indian products such as textiles, marine goods, chemicals, leather and gems. One of the most closely watched elements of the deal is the reduction of automotive tariffs, a sector that until now has been heavily protected in India. Duties on imported European cars, previously as high as 110 % are set to be slashed to 10 % over a phased period of five years, providing a new competitive edge for European automakers such as Volkswagen, MercedesBenz, Renault and BMW in South Asia’s rapidly growing auto market.

The pact further eliminates or cuts levies on machinery, electrical equipment, chemicals, and iron and steel, key inputs for manufacturing and industrial value chains. For Indian exporters, the agreement opens access to one of the world’s most affluent consumer markets. Textiles, pharmaceuticals, leather goods, and gems and jewellery are among the categories slated for zero tariffs, enhancing India’s ability to compete with other emerging market exporters.

The deal comes at a time when global trade relationships are being reshaped by tensions over tariffs and strategic realignments, particularly with the United States. By deepening economic integration with the EU collectively covering nearly 2 billion people and roughly 25 % of global GDP, India is diversifying its trade partnerships and reducing dependence on any single market.

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European leaders, including European Commission President Ursula von der Leyen, have called the agreement historic, framing it as a step toward stronger ties in trade, sustainability and regulatory cooperation.

The pact also includes commitments on trade facilitation and services market access, suggesting a broader economic partnership beyond tariff cuts alone. The agreement still requires legal vetting and ratification by the European Parliament and India’s cabinet, a process expected to take several months. Once implemented, it could enter into force within a year, signaling a new era in India EU trade relations.

For economies in Africa and the broader Global South, the India EU deal underscores the growing role of diversified trade agreements in shaping global value chains. African exporters competing in sectors like textiles and leather may find new opportunities or face heightened competition depending on comparative tariff outcomes.

Additionally, the deal highlights the strategic value of market access negotiations for emerging markets seeking to balance relationships with major economic blocs. As global trade patterns evolve, we can expect ripple effects in commodity flows, export competitiveness, and trade policy debates across regions, particularly as countries reassess their own tariff structures, regional integration strategies, and export diversification goals.