This Alliance Just Became the World's Largest Economy—And America Didn't Even Notice

The European Union and India concluded a free trade agreement on January 27 that creates a unified market of nearly 2 billion people and represents approximately 25 percent of global GDP. The combined economy of the EU-India partnership now exceeds that of the United States.

According to World Economics, the US GDP stands at $28.2 trillion in purchasing power parity terms for 2026. The EU's economy is estimated at $30.2 trillion, while India's GDP reaches $23.3 trillion in PPP terms. Together, the EU-India economic zone totals $53.5 trillion.

Eighteen Years to Build the World's Largest Market

The agreement brings together 453 million Europeans and 1.48 billion Indians. Negotiations began in 2007 and stalled multiple times before resuming in 2022.

European Commission President Ursula von der Leyen travelled to New Delhi for the announcement. She said the partnership represented "a clear choice" for "strategic partnership, dialogue and openness" in "a fractured world."

The deal cuts tariffs on 96 percent of EU exports to India, saving European companies an estimated €4 billion annually in duties. Indian customs duties on European cars will gradually fall from 110 percent to 10 percent. Wine and spirits tariffs drop from 150 percent to 20-30 percent.

While Washington Threatened, Brussels Negotiated

The timing stands in contrast to Washington's approach. Trump imposed a 50 percent tariff on Indian goods earlier this month. He also threatened the EU with tariffs unless it purchased more American goods.

Brussels proceeded with the India negotiations while facing those threats. Indian Prime Minister Narendra Modi called it a "landmark" agreement covering 25 percent of global GDP and a third of global trade.

The deal required compromising. The EU excluded beef, chicken, rice and sugar to protect European farmers. India maintained higher duties on some agricultural products. Both sides accepted those limits to reach agreement.

The Advantage of Negotiating as 450 Million

The EU-India agreement follows a pattern. Canada abandoned a trade deal with China days after Trump threatened tariffs. The EU, negotiating as a unified bloc, did not.

A 450-million-person market offers leverage that individual nations lack. The EU's push for tech sovereignty similarly relies on having sufficient market size to challenge American technology giants.

The India partnership also addresses supply chain vulnerability. Europe has sought to reduce dependence on Chinese manufacturing. India offers an alternative production base with a growing consumer market.

Von der Leyen framed the partnership as demonstrating "another way is possible" beyond the tariff conflicts dominating recent headlines. The question now is implementation. The formal signing will follow legal vetting expected to last five to six months, with the agreement taking effect within a year.

What Comes Next

The agreement still requires ratification by the European Parliament and India's legislature. Trade unions in Europe have raised concerns about labour standards. Indian farmers worry about competition from European agricultural exports in non-protected sectors.

The deal also includes provisions on digital trade, intellectual property protection, and regulatory cooperation. Those elements will face scrutiny as the legal text undergoes review.

If implemented as negotiated, the EU-India partnership will reshape global trade flows. It creates the world's largest economic alliance at a time when Washington has turned toward unilateral tariffs rather than multilateral agreements.

The combined GDP figures tell the story: the EU-India economic zone now surpasses the United States. That shift happened while American policymakers were focused elsewhere. Washington may not have noticed. Brussels and New Delhi did.