After the ‘Mother of All Trade Deals’, US Tariffs Lose Strategic Leverage Over India

NEW DELHI | BRUSSELS | WASHINGTON — The successful conclusion of the India–EU Free Trade Agreement (FTA) at the 16th EU–India Summit marks a decisive inflection point in global trade realignment, sharply diluting the long-term impact of US tariffs on Indian exports.

Described by European Commission President Ursula von der Leyen as the “mother of all trade deals”, the agreement substantially reduces tariff and non-tariff barriers, cuts €4 billion in duties, and creates one of the world’s most predictable trade corridors covering two billion consumers For India, the implications go far beyond Europe.

Why the India–EU FTA Changes the US Tariff Equation

For years, US tariff actions—from Section 232 steel and aluminium duties to sector-specific safeguard measures—have introduced volatility into India’s export outlook. That exposure is now structurally reduced.

Strategic Shift

India has secured preferential, rules-based access to the European market at a scale that absorbs tariff shocks originating from the United States.

Trade diversification is no longer a policy objective—it is now treaty-backed reality.

Will US Tariffs Will Affect India Now?

1. From Vulnerability to Optionality

With tariffs abolished on 9,425 product lines, Indian exporters can redirect volumes toward Europe when US duties erode margins.

Result:
US tariffs shift from being systemic risks to manageable variables.

2. Europe as India’s Tariff Hedge

The FTA combines:

• Zero or near-zero duties
• Predictable regulatory rules
• Enforceable dispute mechanisms

This stability contrasts sharply with the episodic nature of US tariff policymaking.

Result:
India gains a counterweight to US trade unpredictability.

3. Manufacturing Relocation Advantage

As US tariffs accelerate supply-chain diversification away from China, India—now integrated with EU value chains—emerges as a dual-market manufacturing base.

Result:

• India-based production serves both EU and US demand
• Reduced exposure to China-linked tariff escalation

4. Climate Tariffs: A CBAM Shield

The FTA explicitly supports Indian MSMEs in complying with the EU’s Carbon Border Adjustment Mechanism (CBAM) through financial and technical assistance.

Why this matters for the US:
Climate-linked trade barriers are expected to expand globally. India’s CBAM readiness strengthens its negotiating position in future US climate-tariff frameworks.

Sectors Best Insulated from US Tariffs Post-FTA

Beyond Trade: Strategic Depth Matters

The Summit also launched an EU–India Security and Defence Partnership, reinforcing cooperation across maritime security, cyber threats, space, and defence industrial collaboration.

This broader strategic alignment reduces the likelihood of trade weaponisation—a risk that has periodically surfaced in US trade relations globally.

Does This Sideline India–US Trade? No—It Rebalances Power

The United States remains a vital economic partner. However:

• India no longer negotiates under tariff pressure
• Export contraction risk from US actions is structurally capped
• Future India–US talks are likely to pivot toward technology, defence, and supply-chain security

In short, India now negotiates from resilience, not dependence.

The India–EU FTA is not merely a trade agreement—it is India’s insurance policy against tariff nationalism, including from the United States.

By securing preferential access to markets accounting for nearly one-third of global trade and 25% of global GDP, India has ensured that future US tariff actions cannot dictate its export destiny.

Trade sovereignty, once aspirational, is now contractual.