Why the India-EU ‘mother of all’ trade deal is bad news for US President Donald Trump

India and the European Union (EU) on Tuesday (January 27) unveiled what officials are calling a landmark free trade agreement, one that is unlikely to sit well with US President Donald Trump. The deal brings together a bloc Trump has repeatedly criticised and pressured, and a country he has sought to strong-arm with steep tariffs. Trump, who has openly mocked Europe and clashed with it over issues ranging from defence spending to his controversial Greenland ambitions, is also locked in a tense trade standoff with India.

Compounding Trump’s irritation, the European Union has also paused progress on its own trade agreement with the United States. The symbolism is hard to miss: Europe and India, both targets of Trump’s tariff threats, have instead chosen to deepen ties with each other.

Signs of Washington’s discomfort surfaced on Monday when US Treasury Secretary Scott Bessent accused Europe of indirectly financing the Russia-Ukraine war by importing energy routed through India. Speaking to ABC News, Bessent pointed out that the US had imposed 25% tariffs on India over Russian oil purchases, only for Europe to finalise a trade pact with New Delhi days later.

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What Bessent did not acknowledge is that Trump’s own trade tactics may have accelerated the deal. Negotiations between India and the EU have dragged on for nearly two decades. It was the growing uncertainty created by US tariffs, export controls, and diplomatic friction that finally pushed both sides to close ranks. Prime Minister Modi alluded to this global disruption while announcing the agreement. Without naming Trump, he noted that the international order was in flux and that the India-EU deal could help bring stability.

How Trump’s pressure backfired

India is currently facing combined US tariffs of 50%—25% under reciprocal measures and another 25% linked to Russian oil imports. Over the past year, Trump and his allies have repeatedly criticised India, branding it a conduit for Moscow and even framing the Ukraine conflict as “Modi’s war.” The pressure was aimed at forcing India into a trade deal tilted heavily in America’s favour.

New Delhi, however, chose restraint over retaliation. While refusing to bow to US demands, India avoided direct attacks on Trump himself. Europe’s experience has been similar. Trump’s aggressive rhetoric, threats of additional tariffs, and anger over EU resistance to his Greenland proposal have strained transatlantic ties. In response, Brussels shelved its trade talks with Washington, while several European countries declined to participate in Trump-backed diplomatic initiatives in West Asia.

Why the India-EU deal matters?

For India, the agreement sends a clear message: it will not negotiate under duress. In recent months, New Delhi has concluded trade deals with the UK, New Zealand, and Oman, reinforcing its intent to diversify partnerships. India’s negotiating stance reflects an understanding that Trump responds to leverage, not submission. Unlike Canada, where trade talks with China were frozen after Trump threatened 100% tariffs, India has stayed the course.

The EU, for its part, accommodated India’s long-standing sensitivities by excluding agriculture and dairy from the pact, safeguarding Indian farmers. This stands in contrast to US demands for deep access to these politically sensitive sectors. While European leaders have expressed unease over India’s ties with Russia, they have largely avoided public ultimatums or sanctions. That tone helped keep negotiations on track.

India, now the world’s fourth-largest economy, offers Europe a vast and steadily expanding market. Despite occasional disagreements, New Delhi has refrained from publicly pressuring or embarrassing Brussels—an approach that paid dividends. The agreement, set to take effect next year, promises significant gains on both sides. Indian exporters in labour-intensive sectors such as textiles, chemicals, gems, and jewellery, hit hard by US tariffs, will gain preferential or duty-free access to European markets.

The EU is already India’s largest trading partner. Under the FTA, duties will be eliminated on more than 90% of traded goods, while services sectors like telecom and accounting will see reduced barriers. Europe also stands to benefit from India’s decision to slash tariffs on imported EU cars to 40%, down from levels as high as 110%. This opens the door wider for manufacturers such as Volkswagen, Mercedes-Benz, and BMW in the world’s third-largest automobile market by volume.