India's Trade Tensions: EU Suspends Major Export Benefits

The European Union has announced the suspension of export benefits for India under the GSP scheme starting January 1, 2026. This decision impacts key sectors like textiles and plastics, leading to higher tariffs on 87% of India's exports to the EU, challenging Indian competitiveness in the European market.

The European Union has declared the suspension of preferential export benefits for India, Indonesia, and Kenya starting January 1, 2026. This strategic move affects crucial sectors such as textiles and plastics, significantly impacting the trade dynamics with the 27-nation bloc.

This development arrives as the EU and India near the conclusion of free trade agreement negotiations, scheduled for announcement on January 27. According to the European Commission's regulations laid down on September 25, 2025, the suspension will last until the end of 2028, affecting a significant portion of Indian exports.

Experts, including those from the Global Trade Research Initiative, highlight the severe implications for Indian exporters, with 87% of exports now subject to higher tariffs. As the competitive landscape shifts, India's price-sensitive garment sector, in particular, stands vulnerable against duty-free competitors like Bangladesh and Vietnam.

(With inputs from agencies.)