Trade Wars & Alliances: EU-India Seal 'Century Deal' as Trump Targets Korea

Global trade dynamics are bifurcating rapidly. While Europe and India solidified economic ties with a historic free trade agreement this week, the United States has reignited volatility in the Pacific rim with fresh tariff threats against South Korea.

The 'Century Deal': EU and India Pivot

After 20 years of negotiations, the European Union and India signed a landmark trade agreement on Tuesday, slashing tariffs on over 90% of traded goods. The deal, expected to create a free trade zone covering 2 billion people by 2026, is widely viewed as a strategic hedge against US protectionism and Chinese dominance.

• India will lower duties on European automobiles, wines, and machinery.
• The EU grants zero-tariff access to Indian textiles, leather, and jewelry—sectors previously hit hard by US punitive tariffs.
• US Reaction: The White House has expressed dissatisfaction, with officials criticizing the EU for cutting a deal while India continues to purchase Russian oil.

Seoul in Panic Mode

Conversely, geopolitical tensions spiked in Asia after President Trump threatened a 25% tariff on South Korean automobiles, citing the country's failure to fast-track specific investment legislation. The announcement caused immediate tremors in Seoul, with Kospi-listed automakers like Hyundai and Kia seeing sharp equity sell-offs.

South Korean officials have launched emergency inter-agency meetings and plan to dispatch trade envoys to Washington immediately to prevent the tariffs from taking effect.

The 'Bluff' Factor

Despite the immediate market anxiety, data from Bloomberg Economics suggests investors should remain level-headed. An analysis of Trump's first months back in office reveals that only 25% of his tariff threats have been fully implemented, while over 40% have been withdrawn or watered down. The prevailing consensus among seasoned FX traders is that the threats are primarily leverage for negotiation rather than immovable policy, though the short-term volatility for the Korean Won (KRW) remains acute.