Trump is the father of the mother of all deals

Indian mythology has the concept of “Manthan” or the great churning of the ocean in search of nectar which results in the emergence of many substances, including poison. President Donald Trump, in his “Manthan” of the 21st century will inevitably find many outcomes which may hurt him. But he is determined to persist till he finds the ultimate answer to his quest for total American dominance of the world. The India-EU trade deal, which goes beyond trade and embraces security and maritime cooperation is one such result of the churning he has initiated. The negotiations on the deal, which were initiated nearly twenty years ago, suddenly sprang into existence and President Trump had no way of stopping it. Another surprise in the process is the Canadian revolt, which has found the end of the era of beneficial integration and called for “strategic autonomy”, not the Indian variety of political autonomy, but a coalition of middle powers striving for autonomy for a balanced distribution of resources.

The sudden announcement of a far-reaching trade and defense agreement between India and the EU was the result of India and the EU nations looking for greener pastures as the US appeared to abandon them at a time when modern technology demanded more and more rare earths and minerals. President Trump’s grand design to get these by hook or by trade crook has put everyone in jeopardy and unsurprisingly, India and EU decided on a deal which could lead even to deals with the United States. President Trump, who considers himself the master deal maker has found his matches in India and the EU.

The India-EU agreement has provided both India and EU an instrument to replace trade with the United States in the event of delay in the current negotiations with the United States. The alternative of diverting trade to China or Russia maybe hazardous for both EU and India. To find a group of democratic countries to trade with is a helpful situation for India and a large populous nation as a trading partner is a blessing for the EU. The deal brings together the second largest and fourth largest single customs blocs with the estimated market size to be about $ 24 trillion. The India-EU trade in services touched $ 83.10 billion 2024.The detailed FTA document has not been made public as yet, but under the deal, the EU will eliminate duties on about 70.4% of tariff once the deal comes into effect. Taken together, the EU’s tariff concessions will cover more than 99% of the trade value of what India exports to the region.

India’s tariff concessions to the EU will amount to about 92.1% of tariff lines. While a number of European items are set to be cheaper for Indians, the main items that will become cheaper are wine and automobiles. European wine will become cheaper in a phased manner. Tariff on automobiles will go down to 10% from the current 110%. India managed to keep a number of agricultural products out of the deal for the present. The expectation is that the deal will be implemented in 2026, though the vetting process in 27 countries may take time. If India wants to attract investment from other countries through the new route provided by the deal, India will have to take measures to reforms in our regulations to make India friendly for their investment.

The deal also covers important security and defense partnerships, a historic shift, moving the India-EU relationship from a purely economic dialogue to an “operational” strategic alliance to hedge against global instability caused by US policies in the Indo-Pacific region. The deal aims to integrate India into European supply chains, moving beyond a buyer seller relationship. Recently, speaking about the Indo-Pacific, President Trump mentioned South Korea as a partner in place of India, virtually reshaping the Quad when India is expected to host a Quad summit later in the year.

The speed with which the deal was concluded has left several issues open and the reaction of the US may also have an impact on the implementation. The US reaction so far has been a mix of sharp criticism, geopolitical frustration and a cynical acknowledgement of India’s strategic maneuvering. The deal is seen as a consequence of Trump administration’s unpredictable trade policies and high tariffs. The US has also pointed out that this is a great gain for India at a time when the Russian oil issue is still a matter of dispute. This may also affect India’s negotiations on a trade deal with the US even though both sides express optimism that it will be concluded very soon.

Even with all these problems, the India-EU deal has created new possibilities for India and the EU to work together not only in trade, but also in security.