The EU ended tariff breaks on most Indian goods in 2026, raising costs and hurting exports.

On January 1, 2026, the EU suspended tariff preferences for 87% of Indian exports under the GSP, citing export volume thresholds, forcing Indian exporters to pay full Most Favored Nation tariffs on key goods such as textiles, steel, machinery, and chemicals. Only agricultural, leather, and handicraft exports have limited preferential treatment. This change coincides with the full implementation of the EU's Carbon Border Adjustment Mechanism, which increases compliance costs for steel and aluminum exporters. The combined impact of higher tariffs and carbon fees threatens India's export competitiveness, particularly in price-sensitive sectors, with experts warning that 2026 will be one of the most difficult years for Indian exports to Europe in over a decade.