When European railways dismantled internal freight tariffs in the 1960s, prices fell but efficiency did not rise. Routing rules redirected cargo along politically convenient paths rather than economically efficient ones. Delivery times lengthened and costs increased. Liberalisation failed because it altered relative incentives, not because tariffs were cut insufficiently. That episode captures a central lesson of trade policy: prices matter less than structures.

The India-European Union free trade agreement, signed on January 27, 2026, after nearly two decades of stalled negotiations, should be read through that lens. Its significance does not lie primarily in tariff arithmetic. It lies in how US trade coercion distorted incentives so severely that two reluctant partners were pushed into strategic alignment. In that sense, American tariffs have acted as a catalyst.

Trump's tariffs and the steady stream of jibes from Navarro, Bessent and Lutnick aimed at India have done something spectacularly unintended. They've turbo-charged a quiet re-wiring of India-EU economic ties. Trade diplomacy, it turns out, has a spite multiplier. Small wonder that Scott Bessent's recent TV appearances have the unmistakable air of 'FOMO' (somewhere between disbelief and regret) after hearing about the so-called "mother of all deals" being stitched together without Washington at the table.

On conventional metrics, the deal appears not very overwhelming. The EU's average applied tariff on Indian goods prior to the agreement was about 3-4%. Over 75% of Indian exports to the EU already faced tariffs below 1%. By contrast, India's applied tariffs on EU goods averaged 10-12%, with peaks of 110% on automobiles, 150% on wines and spirits, and over 40% on machinery. Liberalisation is,........

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