India-EU Trade Pact Offers Exporters Breath of Fresh Air

By Kimberley Kao and Jason Chau

India's newly inked trade deal with the European Union could give the country's exporters a welcome boost after the tariff blow dealt by the U.S.

India and the EU said Tuesday that the long-awaited trade pact had been finalized, clearing some of the tariff clouds for Asia's third-largest economy.

While most other countries in Asia have negotiated deals with the Trump administration, India has yet to do so and is grappling with 50% tariffs on its U.S.-bound goods. The EU agreement could take some of the pressure off.

Indian Prime Minister Narendra Modi said the deal with Brussels will benefit India's manufacturing sector, including makers of textiles and jewelry.

Almost all Indian chemical and petrochemical products, leather goods and footwear, as well as gems and jewelry, will be granted duty-free access to the trading bloc. Agricultural and seafood products will also get preferential treatment, while tariffs on Indian-made medical devices will be lowered substantially, India's Commerce and Industry Ministry said.

Shares of Indian textile companies ended broadly higher, with KPR Mill and Welspun Living climbing 6.9% and 4.2%, respectively. Leather and footwear exporters also gained, with Mirza International up 10% and Superhouse adding 4.6%.

Stocks of several companies with European exposure rallied, including shrimp exporter Apex Frozen Foods, which jumped 12%.

The benchmark Sensex logged a more subdued gain, rising 0.4% as shares of automakers, now facing more competition from European brands, declined.

Under the deal, tariffs on European cars bound for India are poised to be lowered, falling to 10% eventually. The new rates will be applied to a maximum of 250,000 vehicles each year, the EU said.

The BSE Auto Index shed 1.0%, led by losses in Mahindra & Mahindra, Hyundai Motor India and Maruti Suzuki India, which dropped 4.2%, 4.0% and 1.5%, respectively.

Still, greater access to new markets will mostly be a relief for India's manufacturing economy, brightening the outlook for 2026.

"To mitigate challenges in our export supply chain, we have to make them more and more resilient," Rajesh Agrawal, India's commerce secretary, said earlier this month. "The best way to do it is to reduce export dependence on any one particular geography."

Although India's economy has continued to grow steadily, thanks in large part to its massive consumer market, tariff tensions have been a source of concern for investors.

Foreign investors have remained net sellers of Indian equities in the early stages of 2026, a trend that contributed to the market delivering its worst underperformance relative to emerging-economy peers in three decades in 2025, Capital Economics said.

The deal comes as India prepares its budget for the year ending March 2027, and it could announce more measures to keep its economic engines humming.

Markets will be watching the budget after some reforms in the latter half of 2025--namely to the tax structure--spurred hopes of more changes that could benefit India Inc. and the broader economy.

With geopolitical uncertainty reshaping global supply chains, a simpler, more predictable customs framework could sharpen the competitiveness of India's exports and the effectiveness of free-trade agreements, without posing meaningful fiscal risks, said Garima Kapoor, economist at Elara Capital.

Eyes will also be on any signs of progress in negotiations with Washington, as talks drag on.

Write to Kimberley Kao at kimberley.kao@wsj.con and Jason Chau at jason.chau@wsj.com

(END) Dow Jones Newswires

January 27, 2026 06:14 ET (11:14 GMT)