A proposed trade agreement between India and the European Union—described by European Commission president Ursula von der Leyen as the “mother of all deals”—could offer major relief to Indian exporters hit hard by steep US tariffs.
According to a Moneycontrol analysis, of the nearly $47 billion worth of Indian exports facing US tariffs of 50% or more, close to $40 billion, or 84%, could potentially be redirected to the 27-nation EU bloc if the agreement is finalised.
Von der Leyen and European Council president António Costa are scheduled to visit New Delhi as chief guests at India’s Republic Day celebrations on January 26, with both sides widely expected to sign the landmark trade pact the following day.
Key sectors set to benefit
Gems and jewellery stand out as one of the biggest potential beneficiaries. India exported $3.1 billion worth of precious metal jewellery to the US in 2024, compared with just $784 million to the EU. By contrast, total EU imports of precious metal jewellery amounted to $17.2 billion, highlighting significant untapped potential for Indian exporters if market access improves.
A similar opportunity exists in seafood exports, particularly frozen shrimp. India shipped nearly $1.9 billion worth of frozen shrimp to the US in 2024, while exports to the EU were roughly one-third of that value. With total EU imports of frozen shrimp standing at around $3.9 billion, easing tariff and non-tariff barriers could allow India to scale up shipments.
Textiles and apparel, among the sectors worst hit by US tariffs imposed in late August, could also find meaningful relief through Europe. The EU remains one of the world’s largest apparel markets, and India’s current penetration across multiple product categories remains modest, leaving room for expansion.
Limits to substitution
However, not all sectors are likely to find easy alternatives in Europe. Products such as carpets, spices like cumin seeds, and certain chemicals including sulphur face limited substitution potential due to regulatory hurdles or weaker demand.
Non-industrial diamonds present an even tougher challenge. While the US accounted for about one-third of India’s diamond exports, EU imports from the rest of the world (excluding India) were just $3.6 billion in 2024—well below the $4.8 billion worth of diamonds the US imported from India alone.
Partial but significant relief
While an EU trade agreement would not fully offset the impact of punitive US tariffs, analysts say it could substantially cushion the shock, particularly for high-value manufacturing and labour-intensive sectors where India already enjoys strong global competitiveness.
