What does it do to tariffs and who benefits?

India and the European Union have finalized a trade deal that would remove or reduce tariffs on more than 90% of goods traded between the two.

The free trade agreement would see India reduce tariffs on European automobile and agricultural products, while the EU would do the same for Indian textiles, leather, marine products and gems and jewelry.

Many of these Indian exports have been affected by the U.S. imposing 50% tariffs.

“We have created a free trade zone of 2 billion people, with both sides set to gain economically,” said European Commission President Ursula von der Leyen. She added that the deal sends “a signal to the world that rules-based cooperation still delivers great outcomes”.

The “historic” deal comes at a time when New Delhi is facing the brunt of U.S. tariffs and is looking at alternative markets for its exports. The EU’s long-standing trade ties with the U.S., its largest trading partner, have been tested amid President Donald Trump’s push to annex Greenland.

India’s Commerce and Industry Minister Piyush Goyal said in a press conference on Tuesday that he expected the deal would come into force in 2026.

India is the EU’s ninth-largest trading partner, accounting for 2.4% of the bloc’s total trade in goods in 2024, far behind major partners like the U.S. (17.3%), China (14.6%), or the U.K. (10.1%). But the EU is one of India’s largest trading partners, rivaling the U.S. and China.

The deal would reduce India’s tariffs on European products by around 4 billion euros ($4.7 billion) a year, the European Commission said in a release.

The deal, which the EU expects will help it double its exports to India by 2032, will reduce tariffs on over 90% of European exports to India, such as autos, machinery, agri-food products, chemicals, and aircraft.

“India will grant the EU tariff reductions that none of its other trading partners have received, dramatically improving market access for EU exports,” the European Commission said.

New Delhi has defied expectations of experts by offering to ease tariffs on sectors such as automotive and agriculture, which are particularly sensitive to the levies.

India plans to reduce tariffs on European cars “gradually” from 110% to 10% and abolish duties on car parts after five to ten years. Some major European automobile companies in India include Renault, Volkswagen, BMW, and Mercedes.

New Delhi has also nearly eliminated tariffs of up to 44% on machinery, 22% on chemicals and 11% on pharmaceuticals.

The deal has also reduced or removed high tariffs on…