Kolkata: The Indo-EU trade agreement could pack an unpleasant surprise for US president Donald Trump, who is trying to arm twist India by weaponising import tariffs, of which he has slapped the highest ones on goods imports from India. Data suggest that the top 15 categories of goods that India exports to the US are worth about $45 billion a year and of these, 12 segments have a smaller export value to the EU — about $21 billion.
According to a report by Rubix Data Sciences, if even half of this amount can be redirected to the EU it could transform trade between the two sides. Also it would be a great relief for India — and a replacement market as well after the experience with Trump’s tariffs. The rewprking of the trade with the EU could be possible through tariff relief, harmonized regulations and easier market access, offering a window of opportunity for both India and the EU. The EU comprises 27 member countries.
Reports say that next week India and the EU might announce conclusion of negotiations for a FTA. The deal is expected to pave the way for reduced tariffs on care made in the EU a bigger market for Indian electronics, textiles and chemicals.
India-EU trade
The report states that despite the EU surpassing the US to become India’s largest trading partner in FY25, the value of annual trade between India and the EU remained stagnant at around $136.5 billion between FY23 and FY25. Earlier, EU offered tax exemptions to some Indian products under the GSP. But it has now been removed and the need of the hour is to expand trade.
Significantly, GSP of Generalized System of Preferences is a system which was established under UNCTAD. Under this arrangement, developed countries offered reduced or zero tariffs on imports from developing countries, the objective of which was to boost their economic growth by providing preferential market access for certain products.
India’s share in the EU market
Cumulatively, the EU is a big economy which is worth about $21 trillion. The trade EU region carries out with countries is worth $5.4 trillion. But India’s share in EU imports is only 2.9% and in exports is 1.9%. Another area that needs to be addressed is that more than 70% of India’s exports go to just five countries in the EU region. So this amounts to heightened risk since any economic slowdown in these countries can directly impact India. By the way, in 2024 the EU region carried out trade worth $164 billion in trade with the US.
Tariff difference the obstacle
Currently, many Indian products, especially textiles and readymade garments which are labour-intensive, encounter tariffs ranging from 12% to 16% in the EU. On the other hand, goods imported from the EU to India carry an average 9.3% import duty, especially on cars and industrial goods. This difference has been labelled as a major irritant in trade tensions.
At another plane, the EU region is a major investor in India. Between 2000 to 2024, approximately $119 billion in EU investment has flowed into India. If agreement is reached on services, investment protection, and regulations in the FTA, this relationship could be further strengthened.