It is against this backdrop of tariff militarisation and geopolitical uncertainty that the India–EU FTA must be assessed. Seen from New Delhi, the agreement is framed as an anchor of stability, a diversification hedge against American unpredictability and a signal that India remains embedded in the architecture of liberal trade even as Washington retreats into transactional nationalism. Seen from Brussels, however, it is something more precise: a rare opportunity to lock in market access to the world’s fastest-growing large economy while exporting Europe’s regulatory and climate preferences into Asia.

The result is a deal that offers India predictability in an unpredictable world—but at the cost of absorbing risks that are deferred, diffuse and politically harder to contest.

Trump’s return to tariff diplomacy has fundamentally altered how trade agreements are valued. The United States is no longer merely a difficult negotiating partner; it is an unreliable one. Threats of across-the-board tariffs, selective exemptions, and explicit linkage between trade access and foreign policy compliance have injected volatility into global supply chains. For India, the lesson of the first Trump presidency—when steel, aluminium and GSP benefits were abruptly withdrawn—was unmistakable: access to the US market is contingent, revocable and politically instrumentalised.

The India–EU FTA must therefore be understood as a strategic insurance policy. Europe offers something Washington currently does not: legal certainty. Tariff schedules, dispute settlement mechanisms and binding commitments matter more when unilateralism dominates elsewhere. Yet certainty alone does not guarantee balance. The crucial question is not whether the agreement stabilises trade flows, but who bears the adjustment burden in a world where tariffs are no longer the only weapon.

In this volatile environment, Europe moved decisively to secure tangible, front-loaded commercial gains—particularly in agriculture. Indian agricultural tariffs average over 36 per cent, a long-standing barrier to European agri-food exports. The FTA dismantles these barriers with remarkable scope.

Tariffs of up to 45 per cent on olive oil and vegetable oils fall to zero. Duties as high as 55 per cent on fruit juices and non-alcoholic beer are eliminated. Sheep and lamb meat, once taxed at 33 per cent, enters duty-free. Processed foods—bread, pasta, biscuits, chocolate and pet food—earlier facing tariffs of up to 50 per cent, now enjoy zero-duty access. Alcoholic beverages, a core European demand, see dramatic reductions: wine tariffs collapse from 150 per cent to as low as 20 per cent, while duties on spirits fall to 40 per cent.

These concessions are not marginal. They represent a structural opening of India’s food and beverage market at a time when European farmers face stagnating domestic demand and geopolitical disruption in traditional export destinations. The European Commission estimates that the agreement could save EU exporters up to €4 billion annually in duties, with EU exports to India already supporting around 800,000 jobs. In an era when US tariffs threaten to close markets overnight, India becomes Europe’s long-term growth hedge.

Yet Europe’s generosity stops exactly where its political sensitivities begin. Sugar, rice, soft wheat, beef, poultry, bananas, honey and dairy remain fully protected. Indian exports of competitive products such as table grapes and cucumbers are admitted only through tightly capped tariff-rate quotas, carefully calibrated to prevent market disruption.

More importantly, Europe’s regulatory regime remains untouched. The EU’s sanitary and phytosanitary standards—among the most stringent in global trade—continue to apply in full. Cooperation mechanisms promise dialogue, not dilution. For Indian exporters, tariff liberalisation does not equate to meaningful market access unless regulatory costs fall as well. For European exporters entering India, no equivalent regulatory escalation awaits. This is where the FTA’s imbalance becomes structural rather than sectoral.

India, acutely aware of domestic political constraints, protected its most sensitive sectors. Dairy, cereals, poultry, soymeal and several fruits and vegetables remain excluded. With over 80 million households dependent on dairy alone, exposure to subsidised European imports would have been socially explosive.

But protection is not the same as strategic gain. India’s agricultural access to Europe remains narrow: tea, coffee, spices, gherkins, dried onions, table grapes and selected processed foods. These are niche expansions, not transformative openings. Agriculture continues to occupy a marginal position in bilateral trade that reached $136.5 billion in goods in 2024–25.What India has secured is insulation, not leverage. Its farmers are shielded from immediate shock but remain constrained in their ability to scale into European markets.

If Trump’s tariffs represent the blunt weaponisation of trade, Europe’s Carbon Border Adjustment Mechanism represents its refined successor. From January 2026, CBAM will tax imports based on embedded carbon emissions, initially covering steel, aluminium, cement, fertilisers, electricity and hydrogen, with explicit intent to expand.

Crucially, the India–EU FTA does not neutralise CBAM. There is no exemption, no automatic crediting of India’s climate actions, no transitional relief. This creates a profound asymmetry: EU exports enter India at falling tariffs, while Indian exports face rising carbon-linked costs in Europe.

The implications are significant. India’s exports of steel, aluminium and related products to the EU run into tens of billions of dollars annually. Even modest carbon levies could erase the competitiveness gains created by tariff elimination. Beyond taxation, carbon accounting, verification and compliance impose costs across manufacturing and agri-processing value chains.

Trade analysts have warned that this dynamic front-loads benefits and back-loads costs. Tariff gains are immediate and visible; climate costs are deferred, cumulative and politically harder to contest. In effect, India absorbs the long-term adjustment risk in exchange for short-term stability.

Europe has offered sustainability dialogues, cooperation platforms and references to green-transition financing, sometimes cited at up to €500 million. But these are consultative, not compensatory. They do not offset exporters’ immediate costs nor cap future carbon exposure. In a world where tariffs can be imposed overnight—as Trump has repeatedly demonstrated—regulatory uncertainty can be just as damaging as tariff volatility.

The India–EU FTA is not without strategic logic. In a global economy destabilised by American tariff unilateralism and geopolitical fragmentation, anchoring trade relations with Europe provides India predictability, diversification and diplomatic signalling. It affirms India’s place within a rules-based economic framework even as those rules fray elsewhere.

Yet the agreement also reveals how power now operates in global trade. Europe has secured market access and exported its regulatory preferences. India has secured stability—but internalised future risks tied to carbon, standards and compliance.

In an era shaped by Trump’s tariff gun and Europe’s carbon wall, the India–EU FTA is less a story of shared prosperity than of risk redistribution. The real test will not be whether exports rise in the first few years, but whether Indian farmers and manufacturers can compete sustainably in a trading system where tariffs fall quickly, regulations tighten steadily, and uncertainty has become the only constant. (IPA Service)