India and the European Union have finalised a long-pending landmark trade deal, both sides said on Tuesday, as they seek to hedge against fickle ties with the US.

The deal is expected to double EU exports to India by 2032 by eliminating or reducing tariffs in 96.6% of traded goods by value, and will lead to savings of 4 billion euros ($4.75 billion) in duties for European companies, the EU said.

The EU will cut tariffs on 99.5% goods traded over seven years, with tariffs to be cut to zero on Indian marine goods, leather and textile products, chemicals, rubber, base metals and gems and jewellery, India's trade ministry said in a statement.

"Yesterday, a big agreement was signed between the European Union and India," Indian Prime Minister Narendra Modi said earlier.

"People around the world are calling this the mother of all deals. This agreement will bring major opportunities for the 1.4 billion people of India and the millions of people in Europe," he said.

The accord would open up India's vast and highly guarded market, with New Delhi slashing tariffs on cars to 10% over five years from as high as 110%, according to an EU statement, benefiting European automakers such as Volkswagen, Renault, Mercedes-Benz and BMW.

India is also slashing tariffs on alcoholic beverages like wines to 75% immediately from 150%, which would be lowered to 20% gradually. Tariffs on spirits will be lowered to 40%, the EU said.

The deal will also cut tariffs on a slew of EU goods coming to India including machinery, electrical equipment, chemicals and iron and steel, the EU said.

"Europe and India are making history today," European Commission President Ursula von der Leyen said in a post on social media. "This is only the beginning."

Trade between India and the EU stood at $136.5 billion in the fiscal year through March 2025.

The formal signing of the India-EU deal would take place after legal vetting expected to last five to six months, an Indian government official aware of the matter has said.

"We expect the deal to be implemented within a year," the official added.

Flurry of trade deals

The agreement comes days after the EU signed a pivotal pact with the South American bloc Mercosur, following deals last year with Indonesia, Mexico and Switzerland.

During the same period, New Delhi finalised pacts with Britain, New Zealand and Oman.

The spate of deals underscores global efforts to hedge against trade with the United States as President Donald Trump's bid to take over Greenland and tariff threats on European nations test longstanding alliances among Western nations.

An India-US trade deal collapsed last year after a breakdown in communications between their two governments.

Talks between India and the EU were relaunched in 2022 after a nine-year lull, and gathered momentum after Trump put tariffs on several trading partners, including a 50% tariff on goods from India.

For India, the tariff cuts with the EU will lead to more exports in labour intensive sectors that will help partly offset the impact of U.S. tariffs, said Ajay Srivastava, a former Indian trade official.

He said the deal will also give an immediate price advantage for EU products in India because of relief from its high tariffs, for instance up to 110% on cars.

US strongly criticises deal

The United States has strongly criticized the trade agreement between Europe and India. US Treasury Secretary Scott Bessent accused India of deceptive practices, saying that India purchases Russian oil, refines it, and then sells the refined products to European countries.

The United States has imposed a 25% tariff on India for continuing to buy Russian oil. Despite this, European nations have moved ahead with a trade agreement with India.

President Donald Trump also expressed strong anger over delays in finalizing a US–South Korea trade agreement. In response, tariffs on automobiles and pharmaceuticals were increased from 15% to 25%.

US officials said the United States has made far greater sacrifices than Europe in response to the Ukraine war. They argued that European countries have not taken comparable steps.

“We imposed a 25% tariff on India for purchasing Russian oil,” a US official said. “And just look at what happened last week — European countries signed a trade agreement with India.”

US officials further alleged that Russian oil is shipped to India, refined there, and then sold as finished products to European countries. “In effect, they are financing the ongoing war against themselves,” the official added.