Explained: How the India–EU trade deal will cut import duties on cars, wine and more

A sweeping free trade agreement between India and the European Union is set to significantly reduce import duties on European products, covering nearly 97% of EU exports to India and marking one of the most ambitious trade pacts either side has ever signed.

Under the agreement, tariffs on 96.6% of European Union goods will either be eliminated or reduced, a move expected to save EU exporters up to €4 billion annually in customs duties. While the immediate impact on retail prices will depend on how much of the benefit is passed on, the scale of tariff cuts could gradually make a wide range of imported goods more affordable for Indian consumers.

Industrial goods: Deep tariff cuts across sectors

The deal removes or slashes duties on most EU industrial exports, many of which currently attract tariffs of up to 44%.

Machinery and electrical equipment, aircraft and spacecraft components, plastics, chemicals, iron and steel, and pharmaceuticals will see tariffs reduced to zero for almost all products. Optical, medical and surgical equipment will also benefit, with duties eliminated on around 90% of items, potentially lowering costs in healthcare and diagnostics.

One of the most high-profile changes is in automobiles. Import duties on European motor vehicles, currently around 110%, will be reduced to 10% under a quota of 250,000 vehicles, opening the door to more competitively priced premium cars in India.

Pearls, precious stones and metals will see a more selective reduction, with zero duty on about 20% of products and lower tariffs on another 36%.

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Food and agriculture: From olive oil to wine

The agreement also reshapes tariffs on European agricultural and food products, some of which have historically faced duties as high as 150%.

Tariffs on olive oil, margarine and other vegetable oils will be cut to zero, while processed foods such as breads, pastries, biscuits, pasta, chocolates and pet food will also become duty-free. Fruit juices and non-alcoholic beer will similarly see tariffs eliminated.

Alcoholic beverages will still face duties, but at much lower levels. Import taxes on premium wines will fall from 150% to 20%, while medium-range wines will attract a 30% duty. Spirits will see tariffs reduced to 40%, and beer to 50%.

Among fresh produce, kiwis and pears will see duties reduced from 33% to 10% within quota limits, while sheep meat will become duty-free. Tariffs on sausages and other meat preparations will drop from as high as 110% to 50%.

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Why the deal matters

The European Union has described the agreement as the largest trade deal ever concluded by both sides, saying it will strengthen economic and political ties between the world’s two largest democracies amid rising geopolitical uncertainty.

Prime Minister Narendra Modi said the pact would create major opportunities for people and businesses in both India and Europe, noting that together they account for about 25% of global GDP and one-third of global trade. European Commission President Ursula von der Leyen hailed the agreement as a historic milestone, calling it the “mother of all trade deals.”

While consumers may not see overnight price drops, the breadth of tariff reductions suggests the deal could gradually reshape India’s import market, from cars and medical equipment to chocolates, olive oil and wine.