EU and India sign historic trade deal to hedge against US risks

EU and India Seal Landmark Trade Deal to Double Exports, Hedge Against U.S. Volatility

The European Union and India have finalized a landmark trade agreement aimed at doubling EU exports to the South Asian nation by 2032. The deal seeks to diversify economic partnerships and hedge against risks stemming from an increasingly unpredictable relationship with the United States.

Under the pact, the EU will receive tax exemptions or reductions on 96.6% of its goods, a move expected to save exporters approximately $4.75 billion in duties. In exchange, the EU will slash tariffs on 99.5% of Indian products over the next seven years.

The agreement will eventually eliminate duties on Indian seafood, textiles, gemstones, and jewelry. On the Indian side, New Delhi has committed to slashing tariffs on European automobiles from a peak of 110% down to 10% within five years, a major win for manufacturers such as Volkswagen, Mercedes-Benz, and BMW.

Indian Prime Minister Narendra Modi hailed the accord as the largest free trade agreement in the country’s history. European Council President Antonio Costa emphasized the significance of the deal, describing the EU and India as "strategic and reliable partners."

The signing comes as the EU aggressively expands its global trade network. The bloc has recently pursued similar agreements with Mercosur, Indonesia, and Mexico to strengthen its international market position.

The European Union’s landmark trade agreement with India marks a pivotal advancement in Brussels' "strategic autonomy" doctrine. By securing this pact alongside the recent Mercosur deal, the EU is signaling a tectonic shift in global supply chains, aimed at hedging against the volatility of a potential second Trump administration while establishing a robust economic counterweight to China.

For Vietnam, however, this deal represents a significant structural challenge. The "first-mover advantage" that Vietnamese exporters have enjoyed under the EU-Vietnam Free Trade Agreement (EVFTA) is poised for a sharp erosion. As a manufacturing powerhouse with immense scale, India competes directly with Vietnam in core labor-intensive sectors, including textiles, footwear, and seafood. The removal of tariff barriers for Indian goods will force Vietnamese exporters to contend with a rival that possesses superior production capacity and aggressive pricing power.

This shifting landscape places mounting pressure on Hanoi to accelerate its transition up the value chain. As the competitive field levels, relying solely on the EVFTA’s preferential tariffs is no longer a viable long-term strategy for maintaining market share in the Eurozone. To remain competitive, Vietnam must now prioritize productivity gains, technological integration, and broader market diversification to mitigate the impact of India's formal entry into the EU's preferential trade network.