Investors see opportunities in these sectors
The European Union sealed a major trade deal with India this week, putting potential investment opportunities in the spotlight. Indian Prime Minister Narendra Modi announced on Tuesday that India and the EU had closed the “landmark” free trade agreement, called the “mother of all deals,” by European Commission President Ursula von der Leyen. The agreement represents about 25% of global GDP and about a third of global trade. The EU’s biggest exports to India are machinery, transport equipment and chemicals, according to the European Council. Its biggest imports are machinery, chemicals and fuels. Under the terms of the deal, tariffs on over 90% of EU goods exports to India will be lowered or eliminated. Tariffs on machinery and electrical equipment, which accounted for 16.3 billion euros of exports in 2024, will be slashed from their current level of up to 44% to 0% for almost all products. CNBC spoke to investors about what the deal could mean for markets, and where opportunities might arise as the two economic powerhouses forge stronger trade ties. Electronics and alcohol Michael Browne, global investment strategist at Franklin Templeton Institute, said the “breadth and depth” of tariff reduction was “impressive.” “Whilst the headlines will be dominated by the auto industry, the key take away is the effective ending of tariffs on machinery and electrical equipment, which is a significant boost to the German economy,” Browne told CNBC via email. France’s cognac sector, which is experiencing an ongoing squeeze in sales, resulting in year-on-year negative sales growth from traditional markets such as the U.S. and China, will also welcome the deal, Browne said. Tariffs on wines and spirits will be lowered from 150% to between 20% and 40%, under the terms of the new agreement. “There will be some excitement at seeing tariffs drop from 150% to 40%,” he said. “Whilst still high, it will allow a foothold where the market was effectively shut before.” Byron Maniatis, a partner and EU trade law specialist in the Brussels office of law firm Hogan Lovells, told CNBC on Tuesday that it appeared European wines and spirits could as benefit from the deal. “This is a historic agreement that concludes almost two decades of very difficult negotiations,” he said. “On the basis of the limited information [currently available], the tariffs on EU wines and spirits will be significantly reduced.” Luxury Cédric Rossi, vice president, equity research, luxury and consumer goods, at Stifel, said he saw luxury as the “main beneficiary” of the agreement. He said the reduction of key import barriers—such as India’s Basic Customs Duty, which was cut to 0% under the 2024 EFTA agreement — could hand Swiss watchmakers such as Richemont -owned brands Cartier and Van Cleef & Arpels a “significant pricing advantage” over non-European rivals. Elsewhere, LVMH , Hermès , and L’Oréal ‘s Luxe division will also “benefit meaningfully”, as basic customs duties, goods and services taxes, and India’s social welfare surcharge – which together historically amounted to an effective tax rate of 44% – will be lowered on designer handbags, and perfumes, and cosmetics, Rossi told CNBC via email. Autos, planes and banks Hogan Lovells’ Maniatis told CNBC another key beneficiary of the deal could be the vehicle industries in both Europe and India. “EU exports will be subject to a tariff reduction combined with quotas reportedly starting five years after the entry into force of the agreement,” he said. “Several sectors on both sides are set to benefit from this agreement such as the EU automotive, aerospace, machinery, and chemicals industries.” Under the terms of the deal, levies on aircraft and spacecraft, which currently stand at 11%, will be cut to 0%, with tariffs on autos, medical equipment, plastics, chemicals exports also eliminated for most products. Meanwhile, the pact will offer “privileged access” to Indian markets for EU financial services firms, while customs processes will also be overhauled to make exports quicker and easier. “India will also be opening up its services market. EU financial services are especially likely to profit,” Maniatis said.
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