economist.com
An important change in how countries engage in exchanging goods is happening in a quiet manner through Diplomacy. While increased protectionist actions (including tariff threats) from Washington, various large economies are adjusting their trade partnerships away from the US to India, which has become a leading trade partner.
The most important step is the signing of the “India-EU Free Trade Agreement” on January 27, as called of Prime Minister Modi, “perfect example of how two big economies partner together.” This agreement is being pointed to as an important part of a global strategy to find ways to decentralize trade relationships, particularly as it relates to the heavy reliance on the US problematic under President Trump.
India–EU deal sets the tone
The deal is often referred to by President of European Commission Ursula von der Leyen as “mother of all deals” is creating a type of free trade zone with almost two billion people and around a quarter of the world’s GDP.
As part of the agreement, India has committed to phasing out tariffs on almost all-American products over time, and in return, the EU has committed to dramatically reducing the tariff rates for Indian exports. As a result of the agreement, prices for European automobiles, European wines, and processed food in India will most likely decline. At the same time, Indian manufacturers will have increased access to the EU.
UK turns east amid US uncertainty
The UK’s Prime Minister Keir Starmer is set to make his first visit to China in eight years as London attempts to lessen its reliance on what officials describe as the ‘increasingly unpredictable’ United States, following Trump’s tariffs which have caused some distress to Canada and its allies.
Starmer will be meeting with both Xi Jinping (President of China) and Li Qiang (Premier) and will be accompanied by several senior ministers and business leaders. Additionally, the UK has signed a trade agreement with India to reinforce its strategy of creating other economic anchors in Asia.
Similarly, Canada is currently looking to India for this type of diversification. Prime Minister Mark Carney is scheduled to travel to India in March as a means of getting back on track after a long period of rocky relations between the two nations due to Trump threatening to impose significant tariffs on Canadian goods and implying that Canada could potentially be the “51st state.”
Anita Anand, Canada’s Foreign Minister, announced the intention for Canada to increase its exports outside of the U.S. by 100% within ten years. The focus of conversations between Canada and India will be Uranium, Energy, Main Critical Minerals, and Artificial Intelligence.
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A shared motivation: de-risking trade
Brazil has strengthened its relationship with India, as President Luiz Inácio Lula da Silva will be leading a large business delegation this month.
The common theme among all three countries’ actions is the concept of reducing risk associated with unilateral tariffs and political uncertainty. Despite the high tariffs that India currently faces from the United States, India is positioning itself as a stable, large market with strategic autonomy.
In the words of India’s External Affairs Minister S. Jaishankar, “No country will ever have a veto on India’s global relationship.”
In a fragmented global economy, the expansion of India’s Trade Diplomacy demonstrates that Partnerships, not Pressure, are creating the next phase of Global Business.
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