Under the GSP, Indian exporters enjoyed reduced tariffs compared with the standard Most Favoured Nation (MFN) rates. With the suspension, 87% of India’s exports to the EU will now attract higher duties, leaving only around 13% of products—including select agriculture and leather goods—retaining preferential treatment.
To illustrate the impact, an apparel item previously paying 9.6% duty under the GSP will now incur the full 12% tariff.
From January 1, India faces a major setback in the EU market, GTRI said, noting that the affected sectors span the backbone of India’s exports: minerals, chemicals, plastics and rubber, textiles and garments, stone and ceramics, precious metals, iron and steel, base metals, machinery, electrical goods, and transport equipment.
The EU periodically adjusts GSP benefits, most recently in 2013 and 2023, but this time the concessions have been fully withdrawn for 2026-2028 under Commission Implementing Regulation (EU) 2025/1909, following the bloc’s graduation rules, which remove benefits for product groups once exports cross certain thresholds over three consecutive years. While legally justified, the move is expected to have a sharp economic impact, GTRI said.
The development comes just weeks before the likely conclusion of the India-EU Free Trade Agreement (FTA), expected around January 27, 2026.
“While there is optimism over the conclusion of the India-EU Free Trade Agreement, Indian exporters will, in reality, confront higher trade barriers in the near term, as the loss of GSP preferences coincides with the start of tax phase of the EU’s Carbon Border Adjustment Mechanism (CBAM),” GTRI Founder Ajay Srivastava said.With the FTA’s implementation expected to take at least a year, exporters are bracing for a challenging period of higher tariffs, increased compliance costs, and weakened competitiveness. Price-sensitive sectors like garments are particularly vulnerable, and buyers may shift to duty-free suppliers such as Bangladesh and Vietnam.
India’s bilateral trade with the EU was $136.53 billion in 2024-25, including exports worth $75.85 billion and imports worth $60.68 billion, making the EU India’s largest goods trading partner.