Brussels has not only pressed the accelerator on free trade with Mercosur and looking at South America. It also does so by looking at South Asia, specifically India, where after a whopping 18 years of negotiations, just one year has been enough with Donald Trump back in the White House carrying out his tariff war.
The figures for the commercial monster emerging from this agreement are overwhelming. We are talking about a firm that unites the second and fourth economies in the world and that opens the door to the creation of a market with 2,000 million potential consumers. However, no one is unaware that this pact and its ‘fine print’ will be closely analyzed in light of the tensions that Mercosur is generating in the European field.
The pact was announced this morning by the president of the European Commission, Ursula von der Leyen, who on her social networks has pointed out, openly, that “we have closed the mother of all agreements.” He also highlighted that “we have created a free trade zone of two billion people, from which both parties will benefit”, but pointing out that “this is just the beginning” and that “we will grow our strategic relationship to make it even stronger.”
Sell cars to the third largest market in the world, but also oil, wine and medicines
In general terms, this free trade agreement will not completely eliminate trade obstacles, but it will mean important changes for both parties in the following areas and products that will see their tariffs lowered:
- Automobiles
- Machinery.
- Chemical products.
- Pharmaceutical products.
- Vino.
- Olive oil.
- Meat preparations.
One of the most juicy areas, in terms of exports, that are open to the European Union goes through the automotive sector. China and the US lead a podium whose third step belongs to overpopulated India. According to Reuters, the current tariffs of 70% to 110% for this product may end up being reduced to 40% and even, in later phases, to 10%. Of course, there will be an annual quota of 250,000 cars.
Furthermore, a new front or alternative is opening in the international trade of steel, one of India’s main export goods. For example, in terms of machinery it will be reduced from 44% to 0%. As for chemical products, it also goes from 22% to disappear, just as with products from the pharmaceutical sector, which are currently also at 22%.
As for products from the primary sector, countries like Spain, France or Italy are opening up a truly historic opportunity to access a market that was practically closed tight. The tariff for wine, currently at an unaffordable 150%, will move between 40% and 50% depending on certain cases. Spirits drop to 40%. But Spain and Italy will also see the trade tariff for olive oil disappear. What is a key product for our economy will go from being taxed at 45% to nothing.
Meat preparations drop from 110% to 50%, with the exception of sheep meat, which also disappears after now being at the current 33%. It is key in a country where eating meat is prohibited for religious reasons. In addition, a safeguard has been established in the area of the primary sector, regarding the conditions that must be respected from the market of origin and prevent India from being a country from which products from third countries outside the treaty enter. Therefore, they must be “significantly processed.”
New Delhi, clear victim of Trump’s ‘Liberation Day’, takes revenge
It should be remembered that the closing of this agreement comes after India clearly suffered from the Trump Administration’s tariffs. It has been one of the countries in the crosshairs of the White House’s economic policy due to several key factors, such as new technologies or the pharmaceutical industry. Scenes of freight planes leaving the country full of boxes of iPhones assembled there were frequent at a time of economic uncertainty like that.
Liberation Day, as Trump nicknamed the imposition of ‘reciprocal’ tariffs – they were not in most cases – which led many countries to have to renegotiate with his Secretary of State for Commerce, Scott Bessent, achieving agreements more favorable to Washington or concrete benefits. One of the political lines was directly linked to that of pharmaceutical companies.
35% of the exports of this sector in India are committed to the US, generating a pie of 10.5 billion US dollars. Some Indian firms such as Dr. Reddy’s and Sun Pharma earn half of everything they enter into the US market. Trump has acted on two sides, he is forcing pharmaceutical companies to produce in the United States and he also wants to force them to sell at extremely lower prices, claiming that they do so in Europe – in reality, purchases were negotiated at a certain cost, there is no favored treatment.
