India and the European Union announced a sweeping free trade agreement on Tuesday, capping nearly 20 years of negotiations and creating what both sides called the "mother of all deals"—a pact linking more than 2 billion people across two of the world's largest markets.

The agreement, unveiled in New Delhi by Prime Minister Narendra Modi, European Commission President Ursula von der Leyen, and European Council President António Costa, will slash tariffs on the vast majority of goods traded between India and the EU's 27 member states. It lands at a moment of mounting global trade friction, with both parties facing punitive tariffs from the United States.

"This agreement will bring major opportunities for the people of India and Europe," Modi said, noting that the combined economies represent 25 percent of global GDP and one-third of world trade. "It will strengthen stability in the international system at a time of turmoil in the global order."

The formal signing is expected later this year, after legal vetting and ratification by the European Parliament. Indian Trade Minister Piyush Goyal said he expects the deal to take effect by year's end.

What the Deal Contains

Under the agreement, India will reduce or eliminate tariffs on 96.6 percent of EU exports by value. Brussels will reciprocate with cuts on 99.5 percent of Indian goods over a seven-year period, according to statements from both governments.

The most dramatic changes involve automobiles and alcohol—two sectors India has long protected with steep duties. Tariffs on European cars, currently as high as 110 percent, will fall to as low as 10 percent over five years. A quota system will allow 250,000 vehicles valued above 15,000 euros to enter at reduced rates. Tariffs on car parts will be eliminated entirely after a transition period of five to 10 years.

Wine faces similarly sharp reductions. India's duties on premium European wines will drop from 150 percent to 20 percent. Tariffs on spirits will fall to 40 percent.

The EU says European companies will save approximately 4 billion euros annually in duties once the agreement is fully implemented. Brussels projects that EU exports to India will double by 2032.

For India, the gains concentrate in textiles, apparel, leather goods, footwear, marine products, gems and jewelry, chemicals, and base metals. The EU will eliminate tariffs on these categories over the phase-in period.

Both sides excluded sensitive agricultural products from the deal. India kept dairy, including milk and cheese, along with cereals off the table, citing domestic political considerations. The EU declined to offer concessional tariffs on Indian sugar, meat, poultry, and beef.

The Strategic Calculus

The timing is not coincidental. Both India and the EU are navigating increasingly hostile trade relations with the United States.

Washington imposed a 50 percent tariff on Indian imports last year—25 percent as part of a broader tariff regime, plus an additional 25 percent penalty for India's continued purchases of discounted Russian oil. The Trump administration argued the imports were funding Moscow's war in Ukraine.

The EU faces its own tensions with Washington. President Donald Trump has threatened punitive tariffs on the bloc over disputes involving Greenland, and the broader U.S.-EU trade relationship remains unsettled despite a framework agreement reached last year that set tariffs at 15 percent.

Treasury Secretary Scott Bessent criticized the India-EU deal before it was formally announced. "We have put 25 percent tariffs on India for buying Russian oil," Bessent told ABC News on Sunday. "Guess what happened last week? The Europeans signed a trade deal with India. They are financing the war against themselves."

The administration had not publicly responded to the agreement as of Tuesday afternoon.

Brussels has accelerated its outreach to alternative trading partners over the past year under what von der Leyen calls "strategic autonomy." The EU has signed or advanced deals with Japan, Indonesia, Mexico, Switzerland, and the South American bloc Mercosur—though the latter faces a legal challenge from EU lawmakers.

India has pursued a parallel strategy, finalizing agreements with Britain, New Zealand, and Oman during the same period.

"Ultimately, the agreement is about creating a stable commercial corridor between two major markets at a time the global trading system is fragmenting," said Ajay Srivastava, an Indian trade analyst.

Beyond Tariffs

The agreement extends beyond goods. India and the EU also announced a framework for deeper defense and security cooperation, along with a separate mobility pact designed to ease movement for skilled workers, students, researchers, and seasonal laborers in shortage occupations.

The mobility provisions could lead to increased Indian migration to Europe—a politically sensitive issue in several EU member states, but one that addresses labor shortages in key sectors.

On climate, the EU agreed to provide 500 million euros over two years to help India reduce greenhouse gas emissions. India, for its part, secured a commitment that it would receive the same flexibilities on the EU's Carbon Border Adjustment Mechanism as any third country, though there was no immediate relief for Indian steelmakers and other exporters already subject to the decarbonization levy that took effect January 1.

What Comes Next

Bilateral trade between India and the EU stood at $136.5 billion in the fiscal year ending March 2025. Both sides have set a target of $200 billion by 2030.

The deal still faces procedural hurdles. Legal vetting is expected to take five to six months, followed by ratification in the European Parliament. The Mercosur agreement offers a cautionary example: EU lawmakers voted to challenge that deal in the bloc's top court, and similar opposition could emerge over specific provisions of the India pact.

For now, both governments are treating the announcement as a strategic victory. Von der Leyen called it a tale of "two giants" who chose partnership "in a true win-win fashion."

Garima Mohan, a senior fellow at the German Marshall Fund, offered a more granular assessment. "This is the most comprehensive trade deal India has ever signed, which gives European companies a first mover advantage into this market and gives them a strategic upper hand that other players do not."

Whether that advantage holds depends in part on how Washington responds. India's petroleum minister, Hardeep Singh Puri, told CNBC on Tuesday that the U.S. and India remain at "a very advanced stage" of finalizing their own trade agreement. "Everybody needs to chill a bit," he said.

The EU-India deal, whatever else it accomplishes, has made clear that the world's major economies are not waiting for Washington to set the terms of global commerce. They're writing their own.