India and EU Seal Historic ‘Mother of All’ Trade Deals Amid US Warnings and Democratic Criticism

India and EU Seal Historic ‘Mother of All’ Trade Deals Amid US Warnings and Democratic Criticism

Despite the economic optimism, the deal has drawn sharp criticism from the United States. US Treasury Secretary Scott Bessent warned that Europe is “financing a war against itself” by signing the pact.

RMN News Trade Desk
New Delhi | January 27, 2026

NEW DELHI – In a landmark development, India and the European Union (EU) finalized a comprehensive Free Trade Agreement (FTA) on Tuesday, January 27, 2026. Labeled the “mother of all deals,” the pact creates a free trade zone encompassing two billion people and representing 25% of the global GDP.

Economic Impact and Cheaper Goods

The agreement aims to provide extensive economic benefits by removing or reducing tariffs on 96.6% of EU goods exports to India, which is expected to save approximately 4 billion euros annually in duties. For Indian consumers, products such as European cars, beer, spirits, and various food items are set to become significantly cheaper.

Specific tariff adjustments include:

• Spirits: Tariffs lowered to 40%.
• Industrial Goods: Scrapping of tariffs on machinery (up to 44%), chemicals (22%), and pharmaceuticals (11%).
• Specialized Equipment: Removal of duties on 90% of medical and surgical equipment and almost all EU aircraft and spacecraft exports.

In return, India is expected to receive duty-free access for key export sectors, including textiles, leather, and marine products. European Commissioner for Trade and Economic Security, Maroš Šefcovic, noted that the deal creates a “better business case” for European carmakers, specifically focusing on larger, technologically advanced models while India continues its specialization in smaller vehicles.

Strategic and Defense Alignment

Beyond trade, the two sides launched an EU–India Security and Defence Partnership. European Commission President Ursula von der Leyen characterized the moment as “making history,” emphasizing that the deal is “only the beginning” of a stronger strategic relationship. Additionally, the EU has pledged 500 million euros over the next two years to support India’s efforts in reducing greenhouse gas emissions, highlighting the deal’s climate dimension.

US Concerns and Political Backlash

Despite the economic optimism, the deal has drawn sharp criticism from the United States. US Treasury Secretary Scott Bessent warned that Europe is “financing a war against itself” by signing the pact. Bessent argued that while Europe has reduced direct energy ties with Moscow, it is indirectly funding the Russia-Ukraine war by purchasing Russian oil products refined in India.

Domestically and internationally, the deal also faces scrutiny regarding the state of Indian governance. The “Smokescreen 2026” research report argues that India’s democratic legitimacy is a “managed illusion,” alleging that the Modi administration operates as a “parliamentary dictatorship” through electoral fraud and institutional capture. These critics suggest that the EU’s celebration of India as a fellow democracy ignores systemic “democratic backsliding”.

Timeline for Implementation

While negotiations for the FTA took more than 18 years to conclude, the agreement is not yet in force. Both sides will spend the next fortnight finalizing the text, followed by five to six months of legal scrutiny. The deal must then be ratified by the European Parliament, with officials anticipating it will officially come into force in early 2027.