Jaishankar: India counts on Germany to speed up EU trade deal

Jaishankar: India counts on Germany to speed up EU trade deal

In a strategic move to mitigate the impact of U.S. trade tensions, India is accelerating efforts to conclude a trade agreement with the European Union (EU). This initiative, spearheaded by External Affairs Minister S. Jaishankar, aims to diversify India's trade corridors and reduce dependence on the U.S. market. The push for an EU trade deal comes amidst rising trade barriers and a significant shift in global trade dynamics, driven by the Trump administration's aggressive tariff policies.

The Trump administration's 50% tariffs on India's key exports, set to take effect by August 2025, have significantly strained U.S.-India trade relations [1]. These tariffs, coupled with India's retaliatory measures and strategic realignments, have exposed vulnerabilities in export-dependent sectors such as textiles and jewelry, which together account for over $20 billion in U.S. exports from India [2]. The textile sector, for instance, has faced a 50% levy, pushing U.S. buyers to Vietnam and Bangladesh, where textile imports surged by 25.13% in early 2025 [3].

In response to these trade tensions, India has been actively diversifying its trade partnerships. The India-UK Free Trade Agreement (FTA), which grants duty-free access to 99% of Indian exports, is a prime example of this strategic pivot [4]. Additionally, India is exploring trade corridors with other emerging markets, including Brazil, to mitigate the impact of U.S. trade pressures. This geographic diversification strategy is essential for investors looking to navigate geopolitical trade shifts with resilience and adaptability [5].

The push for an EU trade deal aligns with India's broader strategy to build buffers against future shocks and achieve strategic autonomy. The loss of India's Generalized System of Preferences (GSP) status in 2019, which cost $6.3 billion in exports, underscores the risks of overexposure to U.S. policy shifts [6]. By focusing on sectors aligned with India's long-term growth, such as digital services, agro-processing, and clean energy, investors can capitalize on the opportunities presented by these strategic realignments [7].

Investors must also consider the long-term implications of geopolitical realignment. The Trump-era tariff regime has normalized higher trade barriers, necessitating a shift from reactive to proactive investment strategies. Key principles for preparedness include sectoral selectivity, geographic diversification, and scenario testing [8]. As global supply chains fragment and geopolitical blocs solidify, investors must balance caution with conviction.

The U.S.-India trade saga serves as a case study in the costs of short-term political brinkmanship and the opportunities for emerging markets to redefine their economic trajectories. By concluding a trade deal with the EU, India aims to strengthen its economic resilience and secure a more diversified trade landscape.

References:
[1] https://www.ainvest.com/news/assessing-long-term-impact-trump-tariff-stance-india-trade-emerging-market-exposures-2509/
[2] https://www.bbc.com/news/articles/c98lr56mznjo
[3] https://www.investindia.gov.in/team-india-blogs/indias-trade-policies-how-country-positioning-itself-global-investment
[4] https://www.pinebridge.com/en/insights/indias-markets-can-weather-rising-us-tariffs-heres-why
[5] https://iaicc.org/us-india-trade-relations-in-2025/
[6] https://www.finnovate.in/learn/blog/how-trumps-tariffs-brought-an-impact-in-india-the-hidden-costs-no-ones-talking-about
[7] https://www.ainvest.com/news/strategic-asset-reallocation-emerging-markets-india-trade-tensions-2508/
[8] https://www.ainvest.com/news/india-trade-tensions-reshaping-global-supply-chains-geopolitical-risks-emerging-market-opportunities-2509/