The European Union and India on Tuesday unveiled a sweeping free trade agreement, tearing down tariffs and trade barriers after decades of negotiations between two of the world’s largest economic powers.

A Deal Spanning the Global Economy

The EU, the world’s second-largest economy, and India, ranked fourth, said the pact represents a landmark convergence that will reshape global commerce. According to India’s government-backed news service, the EU, India Free Trade Agreement encompasses roughly one-third of global trade and more than 25% of worldwide gross domestic product.

Indian Prime Minister Narendra Modi hailed the agreement as transformative, saying in a post on X that it would generate “innumerable benefits” for businesses and consumers alike. “It is a new blueprint for shared prosperity,” Modi said.

European Commission President Ursula von der Leyen struck a similarly triumphant tone, calling the pact “the mother of all deals” during a Tuesday press conference. She said the agreement will reach more than 2 billion consumers across both markets.

Tariffs Slashed, Trade Accelerated

A European Commission fact sheet says the agreement will dramatically lower or eliminate tariffs on a wide range of goods, streamline customs procedures and introduce shared rules on digital trade and intellectual property protections. EU officials expect exports from the bloc to India to double once the agreement takes effect.

Nearly 97% of tariffs on EU goods shipped to India will be reduced or scrapped entirely, including duties on machinery, industrial equipment, aerospace products, chemicals and pharmaceuticals. On the other side, more than 99% of tariffs on Indian exports to the EU will be addressed, covering sectors such as seafood, textiles, chemicals and footwear.

Cars, Security and Manufacturing

The agreement also establishes an annual quota allowing 250,000 European-made vehicles to enter India at a sharply reduced tariff of 10%, down from 110%. Beyond trade, the deal includes commitments for closer cooperation between the EU and India on security and defense matters.

Von der Leyen said the agreement will spur joint manufacturing ventures and job creation, blending Indian scale and services with European technology, capital and innovation.

“It brings together Indian skills, services and scale with European technology, capital and innovation,” she said.

She added that the pact reduces strategic dependencies “at a time when trade is increasingly weaponized.”

Geopolitics in the Background

The EU, India Free Trade Agreement arrives as both parties navigate a turbulent global trade environment shaped by U.S. tariffs imposed under President Donald Trump.

The EU recently reached a deal with Washington to cap most tariffs on European goods at 15%, though implementation stalled last week amid renewed tariff threats tied to a now-dormant U.S. push involving Greenland. Those threats were later withdrawn after a preliminary framework addressing U.S. security concerns, and EU officials said work on implementing the deal is expected to resume.

India, however, continues to face some of the steepest U.S. tariffs, totaling 50% on certain goods. Half stems from a national emergency declared by Trump under the International Emergency Economic Powers Act over India’s purchase of Russian oil, while the remainder is linked to a separate IEEPA action targeting persistent U.S. trade deficits.

The White House did not immediately respond to a request for comment on the agreement.