Live Mint - 28 January 2026
India–EU free trade agreement finalised. Can it accelerate an India-US trade deal?
By Nishant Kumar
With the long-awaited India-EU free trade agreement (FTA) finalised after nearly two decades of intermittent negotiations, the market circle is abuzz with speculations that the long-discussed and frequently derailed India-US trade deal can also be sealed in the near future.
India and the European Union (EU) have entered into a landmark free trade agreement that will further open India's markets to European goods.
The EU, which accounts for 25% of global GDP and 33% of global trade, is one of India's biggest trade partners. The India-EU trade deal is expected to further strengthen collaboration between the two major economies of the world across key policy areas such as trade, security, and defence.
While the deal is a significant positive development for the Indian economy and the stock market, investors' focus remains on the India-US trade deal front, as the US, according to reports, remains India's largest trade partner.
Eyes on India-US trade deal
At first glance, the logic appears compelling that an India-EU FTA may nudge the US to finalise a long-stuck trade deal with India. Due to geopolitical and geoeconomic reasons, India remains a key strategic partner for the US.
Experts say that from a geopolitical standpoint, deeper trade ties with India remain important for the US. However, it is difficult to assume that India's trade deals with other major economies will put pressure on the US to accelerate a deal with New Delhi.
Some experts believe that the India-EU trade deal may prompt the US to reconsider its tariffs on India.
"With this new India-EU FTA after dragging for almost two decades, there are hopes that now the US will also be under some kind of compulsion to close a deal with New Delhi," said Sujan Hajra, Chief Economist and Executive Director, Anand Rathi Group.
A trade deal between India and the US remains stuck due to complex political, economic, and strategic issues.
The US has been pushing India on greater market access for agriculture, medical devices, digital trade rules, and labour and environmental standards. Moreover, lately, Trump has been harshly criticising India for buying Russian oil.
India, on the other hand, remains determined to safeguard its farmers and the agriculture sector from increased US imports. New Delhi has also been firmly reiterating that it will prioritise its national interests.
There have been several occasions over the last few months when both countries have signalled that a deal was imminent. However, despite multiple rounds of negotiations, a final India-US trade deal remains elusive.
US President Donald Trump's representative, Jamieson Greer, said on Tuesday that New Delhi has more work to do to address US concerns about its purchase of Russian oil.
Tariffs remain the Trump administration's key strategy to deal with its allies. Some experts even believe that an India-EU trade deal may infuriate Trump and derail the trade talks. For example, he threatened Canada with a 100% tariff if it finalises a deal with China.
"It is possible that Trump may be further infuriated by this India-EU deal, and he might put even more conditions on India," VK Vijayakumar, Chief Investment Strategist, Geojit Investments, said.
The structure of India–US trade relations differs from India–EU ties.
India runs a sizeable trade surplus with Washington, and experts feel a bilateral trade deal would likely require New Delhi to offer meaningful concessions to narrow this trade imbalance.
With a deal with the EU, India has sent a signal that it is willing to move beyond a defensive trade policy and pursue comprehensive agreements.
However, a deal with the US may ultimately depend on how policies in both countries shift, evolving geopolitical factors, including the Russia-Ukraine war, and sectoral trade-offs.
"An India–US trade deal will depend more on New Delhi’s willingness to liberalise further and Washington’s readiness to compromise. India’s trade policy is becoming more outward-looking, which is a structural positive for long-term growth," said Vijayakumar.
