India and the European Union have decided to finalize a free trade agreement by the end of this year. This is the first time they have set a deadline for the talks, which have been ongoing for years. The move aims to reduce the impact of tariff hikes imposed by the United States.

The announcement was made during a joint press conference by European Commission President Ursula von der Leyen and Indian Prime Minister Narendra Modi during her two-day visit to India. India and the European Union have been trying for years to reach a free trade agreement, which would require India to make significant compromises since it has one of the most protected markets in the world. Negotiations for this deal restarted in 2021 after being on hold for eight years.

Modi stated that officials have been asked to finalize the agreement by the end of the year. "We have prepared a blueprint for collaboration in the areas of trade, technology, investment, innovation, green growth, security, skilling, and mobility," he added. The European Union is India's biggest trading partner for goods. Over the past ten years, trade between them has increased by about 90%, reaching $137.5 billion in the 2023/24 financial year. Von der Leyen urged for a bold trade and investment agreement that would include industries such as batteries, pharmaceuticals, semiconductors, clean hydrogen, and defense. Her visit, along with EU leaders, comes at a time of growing global tensions, especially as U.S. President Donald Trump has warned of imposing equal tariffs on all countries, including the EU and India, by April.

"We both stand to lose from a world of spheres of influence and isolationism, and we both stand to gain from a world of cooperation and working together," she said, ahead of talks with Modi. "But I believe this modern version of great-power competition is also an opportunity for Europe, and India, to reimagine its partnership."

The trade deal has been delayed for years since India was unwilling to reduce tariffs in certain areas, while the European Union was hesitant to relax visa rules for Indian professionals. The EU wants India to cut its high tariffs—over 100%—on imported cars, whiskey, and wine. Meanwhile, India is pushing for better access to the EU market for its affordable medicines and chemicals.

India also wants lower tariffs on its textile, garment, and leather exports. Additionally, it opposes the EU’s plan to impose tariffs of 20% to 35% on high-carbon products like steel, aluminum, and cement starting in January 2026. "It won't be easy to conclude the free trade talks unless India agrees to drastically cut tariffs on automobiles and other products that could hit domestic industry," said Ajay Srivastava, of Delhi think-tank Global Trade Initiative.