EU, India Close to Finalize Landmark Free Trade Agreement

India and the European Union are on the verge of finalizing what could become the largest free trade agreement in the world, signaling a major geopolitical and economic shift amid rising global trade tensions.

Spanish Foreign Minister José Manuel Albares said during an official visit to New Delhi on Wednesday that negotiations for the historic deal are progressing smoothly and are likely to conclude within days. He described the agreement as a form of “economic security” designed to shield partners from coercive trade practices.

“This agreement sends a clear message to the world that we believe in free trade and that we have the tools to defend ourselves against economic pressure,” Albares said following meetings with Indian External Affairs Minister Subrahmanyam Jaishankar and President Droupadi Murmu.

The anticipated announcement comes shortly after the European Union is expected to sign a separate trade deal with the Mercosur bloc, reinforcing the EU’s strategy to diversify economic partnerships at a time of growing uncertainty in global trade.

The timing is also politically significant. The deal would underscore closer alignment between India and Europe as US President Donald Trump moves to impose higher tariffs on Indian goods and threatens additional trade measures against Europe, amid broader geopolitical disputes.

Once concluded, the India-EU agreement would create a combined market of nearly two billion people, accounting for roughly 25% of global GDP, according to European Commission President Ursula von der Leyen.

Von der Leyen is expected to arrive in India on Sunday to address remaining sticking points ahead of the India-EU Summit scheduled for January 27. Outstanding issues reportedly center on carbon border taxes and tariff structures affecting key industries such as automobiles and steel.

Despite these challenges, both sides have expressed confidence that a final compromise is within reach.

“Everything is going exactly as planned. We do not foresee any obstacles,” Albares said.

Trade ties between India and the EU have expanded rapidly in recent years. According to EU data, bilateral goods trade rose by nearly 90% over the past decade, reaching €120 billion ($140.5 billion) in 2024.

Jaishankar emphasized the untapped potential for deeper economic cooperation, particularly in strengthening resilient manufacturing capabilities, including in the defense sector.

Albares pointed to the Airbus–Tata Group partnership to manufacture C-295 military transport aircraft in India as a model for future collaboration. Jaishankar noted that the first Airbus aircraft fully manufactured in India, at a joint facility in Gujarat, is expected to roll off the production line before September 2026, ahead of schedule.