There’s nothing quite like a good old-fashioned snub to warm the hearts of estranged friends, and the India-EU Free Trade Agreement, closed today with great fanfare, is precisely that. Twenty years of negotiations, countless rounds of talks, and suddenly, as Donald Trump slaps unbelievable tariffs on Indian goods and wages his trade wars with the enthusiasm of a reality TV star, New Delhi and Brussels decide it’s time to become best friends forever. Coincidence? Let’s call it strategic timing.
The choreography was perfect. As US Treasury Secretary Scott Bessent spluttered about Europe “effectively bankrolling the Russia-Ukraine conflict” by signing a deal with India (because apparently buying refined fuel that happens to be made from Russian crude is the same as sending Putin a Valentine’s Day card), Indian Prime Minister Narendra Modi and European Commission President Ursula von der Leyen were all smiles. Von der Leyen declared it the “mother of all deals,” creating a market of two billion people. Modi called it a “blueprint for shared prosperity.” Canadian Energy Minister Tim Hodgson, clearly enjoying the show, described it as a “perfect example” of rejecting “hegemons who use tariffs as leverage.”
Now, before we get too cynical about geopolitical one-upmanship, let’s ask the obvious question: what does India actually get out of this besides the satisfaction of annoying an estranged friend?
For India, It’s Not Just About Trump
Turns out, quite a lot. While European media is practically doing cartwheels over gaining access to India’s 1.4 billion consumers, India is quietly positioning itself to eat into markets that have belonged to others for decades.
The crown jewel? Textiles. India’s garment and textile industry is about to stage what can only be described as a comeback tour. Under the deal, 99.5% of India’s exports by value will enter European markets duty-free or with preferential access, with tariffs on textiles, leather, and footwear eliminated immediately. These are sectors that currently face EU import duties of 4-26%. For context, that’s $33 billion worth of exports suddenly becoming vastly more competitive.
Union Minister Piyush Goyal has predicted that India’s textile exports to the EU could balloon from the current $7 billion to somewhere between $30-40 billion annually. That’s not a typo. He’s talking about a four to six-fold increase, potentially creating 6-7 million new jobs.
#IndiaEUTradeDeal, the biggest FTA ever done by India 🇮🇳🤝🇪🇺 pic.twitter.com/HXFtLqbeD7
— Piyush Goyal (@PiyushGoyal) January 27, 2026
To put it another way, India is about to become a serious player in Europe’s $250 billion textile market, where it has long played second fiddle to neighbours like Bangladesh and Vietnam.
Speaking of Bangladesh, this is where the deal gets deliciously awkward. For years, India played the benevolent neighbour, fulfilling Bangladesh’s yarn needs, exporting electricity to power Bangladeshi factories, and even granting duty-free access to Bangladeshi garments under regional trade agreements. India essentially helped build Bangladesh’s garment industry into the economic powerhouse it is today, employing over four million people and accounting for more than 80% of the country’s exports.
But then politics happened. The fall of Sheikh Hasina’s government in August 2024 and the subsequent cooling of India-Bangladesh relations (involving disputes over water sharing, border tensions, and Dhaka’s pivot toward China and Pakistan) have changed the game. Bangladesh is about to graduate from Least Developed Country status in 2026, which means it will lose its duty-free access to EU markets. India’s duty-free access, meanwhile, kicks in at exactly the same time. You could call it unfortunate timing for Bangladesh, or you could call it India deciding that charity begins at home.
The Bangladeshi textile industry is already feeling the squeeze. Domestic millers are sitting on $1.1 billion worth of unsold stock and threatening shutdowns. Now they’ll have to compete directly with India in European markets without their tariff advantage. It’s hard not to see this as India moving from regional patron to direct competitor, and doing so with the full backing of Europe’s trade apparatus.
India’s Broader Strategic Calculus
Beyond textiles, India stands to benefit across multiple sectors. The agreement covers everything from gems and jewellery (another labour-intensive export winner) to marine and processed food products. More importantly, India is positioning itself as the West’s answer to over-reliance on China. In an era of supply chain diversification and economic decoupling, India offers something Europe desperately wants: a massive, relatively stable manufacturing base that isn’t China.
This is what makes the deal strategically significant beyond the immediate tariff numbers. As Gautam Khattar of PricewaterhouseCoopers put it, “In an era of rapid geopolitical shifts, this isn’t just a trade agreement, it’s a strategic expansion of India’s global footprint.” India gets to play the role of a reliable alternative, a democracy that Western nations can do business with without the political complications of dealing with Beijing.
The deal also addresses one of India’s long-standing grievances: that it has been locked out of Western markets by tariff barriers while its competitors enjoyed preferential access. Now, with Europe eliminating duties on over 99% of India’s exports while India reduces tariffs on over 96% of European goods, there’s finally something approaching a level playing field. The EU estimates it will save €4 billion annually in duties, which sounds impressive until you realise that’s roughly the cost of India’s exports entering Europe duty-free.
We do not just trade more. We invest in each other’s future.
Our strengths complement
each other.And our scale gives us global influence.
Now with these agreements, we can scale even greater heights. https://t.co/U6FfB8vbqd
— Ursula von der Leyen (@vonderleyen) January 27, 2026
Europe, for its part, is celebrating access to India’s growing middle class and the prospect of selling everything from German cars (import duties cut from 110% to 10%) to Italian wine, French cheese, and Spanish olive oil at reduced tariffs. European officials are practically giddy. The European Commission stated the deal would “turbocharge our economies” and create “new opportunities for European businesses in one of the world’s fastest-growing markets.”
But let’s be honest about what’s really happening here. This is as much about what it signals as what it contains. The combined India-EU market represents about 25% of global GDP and one-third of world trade. When two such economic giants announce a comprehensive trade pact while the United States is busy antagonising its trading partners, it sends a message: the world doesn’t revolve around Washington anymore.
The Long Road Ahead
Now for the reality check. Before anyone starts shipping containers of textiles or ordering French champagne duty-free, there’s the small matter of implementation. The deal announced today still needs to go through legal vetting (expect 5-6 months of lawyers arguing over semicolons), formal signing ceremonies, and parliamentary approvals in multiple countries.
Minister Goyal expressed hope it would come into force within 2026, but between Brussels’ bureaucratic machinery and India’s parliamentary schedule, 2027 might be a more realistic bet.
There’s also the question of whether all this will actually achieve its desired outcome: annoying Donald Trump. Given his recent track record of retaliatory tariffs and Twitter diplomacy, one suspects he’ll find a way to express his displeasure. Scott Bessent’s comments about Europe “bankrolling” Russia suggest the Trump administration has already decided this deal is a betrayal, never mind that the US has spent the past year making itself a thoroughly unreliable trading partner.
Meanwhile, the broader trend of “de-dollarisation” continues apace. Central banks worldwide, spooked by US sanctions and trade wars, are diversifying away from dollar reserves and piling into gold. The Reserve Bank of India is among them. When Trump froze Russia’s reserves in 2022, the message to every other central bank was clear: the dollar is a weapon, and weapons can be turned against you. Gold, inconveniently for Washington, doesn’t care about American foreign policy.
So yes, the India-EU trade deal is partly about giving Trump a bad trip, and judging by the Treasury Secretary’s pained reaction, it’s working. But for India, it’s also about textiles making a comeback, millions of new jobs, and finally competing on equal terms in markets that have been closed for too long. For Europe, it’s about hedging against an unreliable America and gaining access to what might be the 21st century’s most important consumer market.
The deal might take months to implement, years to show its full effects, and decades to reshape global trade patterns. But today, at least, it accomplished one thing perfectly: it reminded Washington that the world has options. And in the age of Trump’s tariff tantrums, that message alone might be worth the twenty years it took to get here.
