By Ted Fraser, Senior Editor
European Commission President Ursula von der Leyen and European Council President Antonio Costa were in New Delhi this week, finalizing the text of a long-negotiated trade deal between the European Union, the world’s largest single market, and India, the world’s fastest-growing major economy.
On Tuesday, following down-to-the-wire negotiations, von der Leyen, Costa, and Indian Prime Minister Narendra Modi unveiled the agreement, which creates a market of 2 billion people. The European Parliament will still have to approve the deal, which could take up to a year. But the Tuesday signing, together with a new defence pact and mobility agreement, cements the India–EU strategic partnership, signalling relative economic alignment as tariffs and coercion chip away at the global trading system.
The pact, negotiated off and on for 18 years but kickstarted with renewed urgency in 2022, is a huge win (and relief) for both sides. It will help India offset punishing U.S. tariffs and claw back competitiveness — dashed after the EU suspended tariff preferences for India in 2023 — and crack open European access to booming Indian sectors such as automobiles, aircraft, and more.
Von der Leyen has described the pact as the “mother of all deals.” She and Costa were in New Delhi for the 16th EU–India Summit and were picked as the chief guests at India’s Republic Day festivities on Monday, an honour typically bestowed upon India’s most important partner. The EU is India’s largest goods trading partner; bilateral merchandise trade hit C$195 billion in 2024.
The fine print
In terms of trade value, the agreement will see the EU eliminate tariffs on 91 per cent of goods, while India will eliminate tariffs on 93 per cent of goods. Notably, India will, in time, cut tariffs on European autos to as low as 10 per cent (from as high as 110 per cent); the EU will exempt half of Indian steel exports from tariffs. The EU mainly imports machinery, appliances, chemicals, base metals, and textiles from India. EU exports to India consist mostly of machinery, appliances, and transport equipment.
Messaging from both the EU and India was overwhelmingly positive, signalling independence from Washington and Beijing. Von Der Leyen said this week that, “by combining [our] strengths, we reduce strategic dependencies, at a time when trade is increasingly weaponized."
The two sides also finalized a security and defence pact, which, according to von der Leyen, will deepen work on “cyber and hybrid, [...] diversify military supply chains, and improve access to new capabilities.” The EU is hoping India, long a top buyer of Russian (and increasingly, American) military equipment, will buy more European defence technology.
It’s been a banner year for Indian trade: New Delhi signed a trade pact with the U.K. in July 2025 and concluded negotiations with New Zealand in December 2025; another deal with Iceland, Liechtenstein, Norway, and Switzerland came into effect in October 2025. The EU, in contrast, sorely needed a win on trade. Last week, the European Parliament requested a legal opinion on a pending trade deal with Mercosur, delaying its formal implementation for up to 24 months.
What it means for Canada
Ottawa will be encouraged by the urgency of New Delhi’s trade diversification push. Formal negotiations towards a Canada–India Comprehensive Economic Partnership Agreement will begin in March, according to Dinesh Patnaik, India's high commissioner to Canada. The two sides are looking to close a deal “within a year,” says Patnaik, although this timeline may be ambitious.
Canadian energy and natural resources minister Tim Hodgson is in India from Tuesday to Friday, participating in India Energy Week and the first Canada–India energy dialogue in eight years. Hodgson’s trip and a February visit by Canadian artificial intelligence minister Evan Solomon will lay the groundwork for Canadian Prime Minister Mark Carney’s March trip to India (and Australia).
