German Chancellor Friedrich Merz floated on Monday the possibility that the European Union and India could sign a landmark free trade agreement by the end of January, a move that could reshape global trade ties as protectionism rises and US-India talks remain stalled.

Top EU leaders would travel to India to seal the deal if negotiations wrap up in time, Merz told reporters in the western Indian city of Ahmedabad on Monday after meeting Indian Prime Minister Narendra Modi.

“In any case, they will take another major step forward to ensure that this free trade agreement comes into being,” Merz said during his first trip to India since becoming chancellor. European Union officials have yet to comment. 

A trade deal, under ⁠discussion for years, is seen as a chance for both sides to strengthen economic ties and cut reliance on China and Russia. Bilateral trade between India and the EU totalled 120 billion euros ($140.21 billion) in 2024, making the bloc ⁠India’s biggest trading partner. 
 
Talks have gathered pace since the US, under President Donald Trump, raised tariffs on Indian goods and pressured New Delhi to stop buying Russian oil. A separate India-US trade deal collapsed last year after a breakdown in communication between the two governments. 

The EU-India pact would follow on the heels of the European Union’s recent agreement with South America’s Mercosur ‍group and support Europe’s ‌push to build new trade networks as global rules shift. Indian Trade Minister Piyush Goyal, speaking at a separate event in the western state ⁠of Gujarat, said an agreement was almost at its ‌final stages.

German officials told Reuters the latest talks between Merz and Modi were “very intensive,” raising hopes for a breakthrough. The EU is ‌pushing for steep tariff cuts on cars, medical devices, wine, spirits, and meat, along with stronger intellectual property rules, while India is seeking duty-free access for labour-intensive goods and faster recognition of its growing autos and electronics sectors.

An Indian official familiar with the talks told Reuters last month that disputes over steel, carbon levies, and market access would need further compromise. The two countries signed agreements on minerals, healthcare, and artificial intelligence ‍during Merz’s visit.

Germany relies on India as a growing market and the German chancellor said the world is experiencing “a renaissance of unfortunate protectionism” that harms Germany and India. He did not name any countries.  

While the US has imposed tariffs on trading partners, China introduced ⁠export controls on minerals used in areas such as autos, causing months of supply ⁠chain disruption last year due to the U.S.-China trade war and affecting German carmakers. 
Beijing also slapped restrictions on some semiconductors widely used in the car industry after the Dutch government’s decision to seize control of Chinese-owned chipmaker Nexperia.