The trade deal between India and the European Union is as much about geopolitics as it is about intercontinental business relations.

The EU is already India’s largest partner, with trade in goods reaching $142.3bn (£104.07bn) in 2024, representing 11.5% of the South Asian country’s total trade. India is the EU’s ninth largest trading partner.

These are impressive numbers and reflect a strong relationship. Despite this, trade negotiations have been stalled for 20 years.

That begs the question. What has changed now? The answer lies in the rapidly evolving geopolitical landscape and the unpredictability of the US administration under President Donald Trump.

Although U.S. leaders have used tariffs as a bargaining chip in some negotiations, they have also often used tariffs to punish countries that disagree with their worldview, including their partners.

The US has imposed 50% tariffs on Indian goods, including a 25% fine for Delhi’s refusal to stop buying oil from Russia.

Several EU countries have recently faced the threat of new tariffs from President Trump, after the US president was ousted after refusing to accept a proposed purchase of Greenland. He has since retracted his threat, but experts say it confuses the EU.

The EU and India are not the only countries looking to avoid risks when it comes to the US. Delhi Free Trade Agreement (FTA) It was secured as countries signed a flurry of agreements to patch things up in an attempt to cope with the global unpredictability.

The EU-India agreement, India’s seventh recently concluded trade deal, comes after Brussels signed a trade deal with the South American trading bloc Mercosur earlier this month after 25 years of negotiations. Experts say the Trump factor also contributed to its acceleration, but it now faces legal challenges in Europe.

Canadian Prime Minister Mark Carney, who last week warned of a “rupture” in the post-war international order, has just returned from a trip to reset ties with China, which has strengthened trade ties, drawing the ire of President Trump and fresh threats of 100% tariffs. Carney plans to visit India in the near future, with trade at the top of his agenda. British Prime Minister Keir Starmer will be heading to Beijing this week with dozens of British business executives following years of tensions with China.

Against this backdrop, the India-EU trade deal, which is still subject to ratification, assumes greater geopolitical importance as it brings more than just trade outcomes for both Brussels and Delhi.

This sends a message to President Trump that world powers are beginning to consider ways to unite to protect themselves from the Trump administration.

“You could argue that the Trump factor gave a very strong impetus to the deal, as both India and the EU face unexpected and shocking tariffs from the US,” said Michael Kugelman, senior South Asia fellow at the Atlantic Council.

He added that President Trump was a big reason why the EU and India were able to overcome most of their differences and put the unresolved issues on the back burner in future negotiations.

Both Indian Prime Minister Narendra Modi and European Commission President Ursula von der Leyen called Tuesday’s agreement the “mother of all agreements”.

“This is a story of two giants, the world’s second and fourth largest economies, two giants who chose to partner in a truly win-win way, and a strong message that cooperation is the best answer to global challenges,” said von der Leyen, standing next to Prime Minister Modi after the exchange of agreements.

“By combining these strengths, we reduce our strategic dependence at a time when trade is increasingly weaponized…We are not only strengthening our economies, but providing security for our people in an increasingly volatile world.”

Prime Minister Modi said the world order was in “great turmoil” and the trade deal would strengthen global supply chains.

“This means this is more than just a trade deal. This is a new blueprint for shared prosperity,” he said.

The two leaders may or may not have intended to embarrass the Trump administration with this deal, but that appears to be exactly what they did.

U.S. Treasury Secretary Scott Bessent told ABC News on Sunday that the EU is “funding a war against itself” by signing a trade deal with Delhi.

He was referring to India’s purchases of Russian oil, which U.S. officials have frequently claimed are indirectly funding Russia’s war in Ukraine. India has always denied this, insisting that its purchases of Russian oil ensured the energy needs of its millions of citizens.

The longstanding ties between Delhi and Moscow are also the reason why India is reluctant to abruptly sever business ties with Russia. Russia has long relied on Russia for military equipment, and today’s agreement will help further strengthen its already strong defense relationship with France, with a view to diversifying its defense import portfolio with other European countries as well.

The India deal also gives the EU access to another huge market and could help reduce dependence on China in the future.

“India would also consider this partnership as a way to counter China’s dominance in global trade, which it had envisioned partnering with the US, but the situation is different at the moment. The EU similarly sees India as a useful country to partner with in its own efforts to counter China,” Kugelman added.

But behind the exciting headlines, it is worth remembering that there is still much work to be done for both India and the EU. Negotiations on this agreement have concluded, but it will take a long time for the agreement to be officially signed.

It will take months for legal experts on both sides to finalize the text of the agreement, which will then need to be approved by member states and the European Parliament, which experts believe will not be easy, as the Mercosur agreement shows.

Mark Linscott, senior trade advisor for the U.S.-India Strategic Partnership, wrote on LinkedIn that there are still issues to be resolved, including intellectual property, agriculture and carbon emissions.

But European business groups and Indian industries that have been severely affected by U.S. tariffs have widely welcomed the deal, saying it will expand market access in both directions.

Fredrik Persson, president of BusinessEurope, which represents business groups across the EU, said this was an important “first step”. But he added: “Implementation is key to unlocking the full potential of the agreement.”

President Trump’s tariffs may have sped up the deal in Delhi, but they were not the only reason the deal was reached. The EU and India resumed full-scale negotiations in 2022, aiming to reach an agreement as soon as possible.

The EU agreement also confirms India’s renewed interest in signing more free trade agreements (FTAs) with countries and blocs, opening up vast traditionally protected markets.

The EU is India’s largest trading partner, so it is no wonder that the size of the agreement is much larger than other FTAs, including the one with the UK.

In this context, India will not want to give up on trade negotiations with the Trump administration as the US remains an important and critical market for India. And the EU won’t want to anger Washington either.

But they would be willing to accept this deal if it would help both countries gain more leverage in future negotiations with President Trump.

It’s impossible to predict how President Trump will react.