The recent proposal by Trump to the EU to impose a 100 per cent tariff on India and China, which was a part of an effort by the Russian president to end the war in Ukraine, is on the verge of conclusion. The EU has turned down Trump's suggestion to impose a 100 per cent tariff on India due to its ongoing imports of Russian oil.
The European Union has not made any official announcements about possible tariffs on India and China yet.
Olof Gill, EU spokesperson for trade, stated, "We do not disclose details of political meetings due to the need for confidentiality when it comes to sensitive exchanges on sanctions work. In a wider sense, we can recall that the EU has engaged with all relevant global partners, including India and China, in the context of its sanctions enforcement efforts. This engagement will continue."
Where it all started
Trump called on the EU to implement hefty 100 per cent tariffs on goods from China and India. He believes this could ramp up the pressure on Russia to put an end to its ongoing war in Ukraine. This is quite different from his Tuesday updates, where he emphasised that discussions about trade between India and the US were still in progress to tackle the existing trade barriers between the two nations.
The EU's response to the suggestion
EU officials pointed out that tariffs are quite different from sanctions. They need a thorough legal review and solid justification before they can actually be put into action.
The EU is focusing on targeted sanctions aimed at specific entities linked to Russia, which include certain Chinese banks and an Indian refinery. They prefer this measured approach instead of imposing broad punitive tariffs that could lead to serious economic fallout. This strategy really shows the EU's dedication to handling the complex issues of geopolitics and trade in a thoughtful way.
Overall impact on India
Despite the challenges, experts see these developments as a major diplomatic win for India and expect a favourable reaction from the Indian stock market soon. On Thursday, September 11, the benchmark Nifty 50 closed above the 25,000 mark, with a slight increase of 32 points or 0.13 per cent.
What's next for India-EU FTA?
The next set of talks for the proposed India-EU Free Trade Agreement (FTA) kicked off on Monday, September 8. This marks the 13th round of discussions and they're critical as both parties are racing against a year-end deadline to finalise the agreement.
Also read: India–UK CETA pact: what does it mean for trade, particularly aluminium?
After the 13th round of negotiations, European Commissioner for Trade Maros Sefcovic is arriving in India for a visit on September 12. He will meet the Union Commerce and Industry Minister Piyush Goyal to check in on how the talks are progressing, as reported by PTI.
Research & strategists' thoughts on the development
Seema Srivastava, a Senior Research Analyst at SMC Global Securities, pointed out that the EU, which happens to be India's second-largest trading partner, is ramping up its Free Trade Agreement negotiations. This move is primarily fueled by Europe's desire to diversify its supply chains, especially in light of the rising global trade tensions.
She added, "India's trade surplus with the EU has expanded, reflecting growing European demand for Indian products. With an FTA expected by year-end, stocks with 'India-first' business models and diversified export bases will likely be attractive investment options for long-term prospects."
Prashanth Tapse, Senior VP (Research) of Mehta Equities, shared the thought that the ongoing development is set to influence market sentiment, suggesting that global players might not fully support Trump's tariff approach.
That said, the immediate effects could be minimal, as corporate earnings will likely remain the key driver of market activity. Foreign institutional investors are also keeping an eye on earnings reports and if Q2 earnings show improvement, it could give the market a significant lift.
VK Vijayakumar, the Chief Investment Strategist at Geojit Investments Limited, pointed out that while this report brings a wave of positivity, there are also several other factors playing a big role in boosting our optimism.
According to him, a significant bounce back in economic growth will be seen, due to income tax cuts, some stimulus from monetary policy and reductions in GST rates. It is also expected that earnings will start picking up again from Q3 onwards, and there's a possibility that an extra 25 per cent US tariff will be lifted in the next few months.
Fitch Ratings has updated its growth forecast for India in FY26, bumping it up to 6.9 per cent from the previous estimate of 6.5 per cent made in June. This change is attributed to strong momentum in the services sector and steady spending from both households and the government.
Also read: Rupee sinks to record low as US tariffs rattle investor confidence
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