For years, India, Pakistan, and Bangladesh fought over cricket wins and tense border lines. Now, in 2026, the real action’s happening at the ports. In just one wild week, India pulled off a diplomatic one-two punch- inking a huge Free Trade Agreement with the European Union and ending a nasty trade war with the United States.
New Delhi isn’t just keeping up anymore; it’s changing the whole playbook, leaving Islamabad and Dhaka scrambling to keep up and wondering how they’ll survive in this new world.
The “Mother of All Deals”: India and the EU Join Forces
On January 27, 2026, India and the EU signed what people are already calling the “Mother of All Deals.” This agreement opens up a free-trade zone covering 2 billion people and nearly a quarter of the world’s economy.
The payoff for India is massive: 99% of Indian exports head into Europe, duty-free.
Basically, India just knocked out the “Zero-Duty” advantage Pakistan and Bangladesh used to have. For years, those two shipped their textiles to Europe at 0% duty by playing the “Developing Nation” card, while Indian products got slapped with a 12% tax. Now, that’s gone.
Indian textiles, leather, and footwear are about to flood the European market. Industry insiders are already throwing out huge numbers- India’s textile exports jumping from $7 billion to $40 billion, eating into the market share Pakistan and Bangladesh thought was theirs for good.
A New Deal with America: Tariffs Get Slashed
The EU deal was a masterstroke, but the breakthrough with the US is what really got markets buzzing. After a tense call between Prime Minister Modi and President Donald Trump on February 2, 2026, the US agreed to drop its tariffs on Indian goods from a brutal 50% down to just 18%.
<blockquote class="twitter-tweet"><p lang="en" dir="ltr">Wonderful to speak with my dear friend President Trump today. Delighted that Made in India products will now have a reduced tariff of 18%. Big thanks to President Trump on behalf of the 1.4 billion people of India for this wonderful announcement.<br><br>When two large economies and the…</p>— Narendra Modi (@narendramodi) <a href="https://twitter.com/narendramodi/status/2018377090840830101?ref_src=twsrc%5Etfw">February 2, 2026</a></blockquote> <script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
This “Trade Reset” wipes out the old penalty tariffs that got slapped on India for buying oil from Russia. In return, India promised to ramp up imports from the US- $500 billion worth, covering energy, tech, and agriculture.
With both sides settling on 18% duties, India just cemented its spot as the West’s main alternative to China, making sure “Made in India” goods stay in the running in the world’s biggest market.
Why Pakistan and Bangladesh Are Panicking
You can feel the anxiety in South Asia. Pakistan’s textile industry- responsible for 60% of its foreign earnings- is teetering on the edge. With its GSP+ trade perks about to expire, and India now getting the same duty-free access to Europe, Pakistan’s $9 billion export machine is sputtering.
Ex-ministers are sounding the alarm, saying 10 million jobs could vanish as buyers shift to India’s now just-as-affordable and more stable factories.
Bangladesh isn’t in much better shape. As it moves up from “Least Developed Country” status, it’s losing the very trade benefits that India is now gaining. The result? The global supply chain is shifting. Brands that used to chase cheap labor in Dhaka are looking hard at India, drawn by its scale, speed, and new zero-duty access.
The Start of the Indian Decade
India just opened an economic front its neighbors can’t defend. By locking down a giant free-trade zone in Europe and cooling things off with the US, New Delhi has built a shield against global turbulence.
For Pakistan and Bangladesh, the days of easy zero-tariff exports are over. India didn’t just sign a couple of deals- it just staked its claim to the economic future of the subcontinent.
