EU Trade Deal Could Redirect 84% of Indian Exports Hit By US Tariffs

A proposed trade agreement between India and the European Union could significantly soften the impact of punitive US tariffs on Indian exports. According to an analysis, nearly $40 billion of the $47 billion in Indian goods facing US tariffs of 50 per cent or more could be absorbed by the 27-nation EU bloc.

The EU trade deal has been described by European Commission President Ursula von der Leyen as the “mother of all deals.” Von der Leyen and European Council President António Costa are expected to be in New Delhi as chief guests for the Republic Day celebrations on January 26, with the trade agreement widely expected to be finalised the following day.

Why is the EU Trade Agreement Important Now?

This is because several Indian export sectors have been under pressure after steep US tariffs took effect, particularly in late August. While the EU agreement would not fully offset the US tariff shock, it could act as a meaningful buffer for a large share of affected exports.

The EU’s size and diversified demand make it one of the few markets capable of absorbing volumes comparable to those in the US, especially for high-value, labour-intensive Indian products.

Which Sectors Could Benefit from the EU Trade Deal?

The following are the sectors that Could Benefit from the EU trade deal news: 

• Gems and Jewellery

India exported $3.1 billion worth of precious metal jewellery to the US in 2024, compared with only $784 million to the EU. During the same period, the EU imported $17.2 billion worth of precious-metal jewellery worldwide.

This gap highlights significant untapped potential for Indian exporters if market access improves under a trade agreement.

• Seafood Exports,  Particularly Frozen Shrimp

India shipped close to $1.9 billion worth of frozen shrimp to the US in 2024, while exports to the EU were roughly one-third of that amount. 

Total EU imports of frozen shrimp are around $3.9 billion, indicating scope for India to scale up shipments if tariff and non-tariff barriers are eased.

• Textiles and Apparel

These exporters, which are among the worst hit by US tariffs, could also see relief through Europe. 

The EU remains one of the world’s largest apparel markets, and India’s current penetration across several product categories is relatively modest, thus leaving room for expansion.

Sectors Where Substitution May Be Limited

Not all sectors are likely to find an easy alternative in the EU. 

Products such as carpets, spices like cumin seeds, and certain chemicals, including sulphur, face limited substitution potential due to demand constraints or regulatory barriers.

Non-industrial diamonds may find it particularly challenging. 

While the US accounted for about 1/3 of India’s diamond exports, EU imports from the rest of the world, excluding India, were only $3.6 billion in 2024. 

This value is significantly lower than the $4.8 billion worth of diamonds the US imported from India alone, limiting Europe’s ability to fully replace US demand.

What is the Impact of the EU Trade Deal on India’s Export 

An EU trade deal would not eliminate the pressure created by US tariffs. However, it could cushion the impact, especially for sectors where India already has established global competitiveness.

For exporters in high-value manufacturing and labour-intensive industries, improved access to the EU market could provide stability at a time of shifting global trade dynamics. 

For markets, the deal signals how trade diversification is becoming increasingly crucial as tariff risks rise across geographies.

Key Takeaway for Market Participants

Trade policy shifts are increasingly shaping export-driven sectors. Tracking how global agreements redirect trade flows can offer early signals on sector-level demand and long-term competitiveness.

Source: https://www.moneycontrol.com

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