The imposition of steep tariffs by the United States under President Donald Trump’s “America First” trade policy played a significant role in accelerating the conclusion of a historic free trade agreement between India and the European Union, according to reports in western media.
The agreement, finalised after nearly two decades of intermittent negotiations, brings together two of the world’s largest economies into a free trade zone encompassing nearly two billion people and accounting for about a quarter of global gross domestic product. A report by Newsweek described the pact as one of the most consequential trade deals signed by either side.
Analysts cited in the report said higher US tariffs, ranging from 25 to 50 per cent on steel, aluminium and other Indian exports—along with the collapse of US–India trade negotiations last year- prompted New Delhi to reassess its trade strategy and deepen engagement with Europe. The tariffs effectively pushed India to diversify its economic partnerships amid growing uncertainty in transatlantic trade relations.
European countries, meanwhile, were facing increasing strain in their own relations with Washington. Trade tensions intensified as the US administration threatened additional tariffs in disputes unrelated to trade, adding urgency to the EU’s efforts to secure alternative global partnerships. An EU diplomat quoted by Newsweek said the pressure created by US tariff threats helped both sides overcome remaining obstacles in the final stages of negotiations.
European Council President Antonio Costa described the agreement as a geopolitical stabiliser, positioning it as a reaffirmation of commitment to a rules-based international trading system at a time when unilateral trade measures are becoming more common. The report noted that the pact was framed as a deliberate response to growing protectionism in global trade.
The agreement is also viewed as part of a broader strategic effort by both India and the EU to reduce dependence on China-dominated supply chains. Concerns over China’s control of critical manufacturing sectors and its expanding influence in Asia have prompted both sides to seek diversification in sourcing and production.
European Commission President Ursula von der Leyen said strengthening strategic cooperation and reducing reliance on single suppliers were central motivations behind the deal. The report highlighted that the agreement creates opportunities for European companies to relocate or expand production in India, particularly in sectors such as batteries and specialty chemicals, while safeguarding tariff benefits from being eroded by Chinese components.
In addition to trade, the pact includes the first-ever India–EU Security and Defence Partnership, signed alongside the free trade agreement. This parallel framework is aimed at enhancing cooperation in areas including maritime security, defence technologies, cyber security, space collaboration and counter-terrorism.
Indian Prime Minister Narendra Modi described the agreement as the largest free trade deal ever concluded, emphasising its potential to boost exports, support farmers and small businesses, and lower costs for consumers. The report noted that the scale of the agreement underscores its economic and strategic significance for both India and the European Union.
According to Newsweek, the deal signals that major global economies are seeking stability and long-term cooperation in response to shifting US trade policies and broader geopolitical uncertainty, reinforcing the relevance of multilateral economic partnerships in the evolving global order.
