The Engineering Export Promotion Council (EEPC) of India has warned that Indian engineering exports to the EU could decline by 10% annually if the India-EU free trade agreement (FTA), expected to be signed on January 27, fails to address the EU's steel safeguards and the Carbon Border Adjustment Mechanism (CBAM). 

The EU is India's second-largest market in FY25, accounting for 17.1% of engineering exports, with a projected export value of $118 billion in 2024-25.

The CBAM requires importers to declare carbon emissions. Without verified data, overestimated default values will be used, potentially increasing costs by €400-500 per tonne, higher than the actual €250-400. Engineering products, heavily reliant on steel and aluminum, are particularly vulnerable.

In addition, the EU has proposed cutting duty-free steel import quotas to 18.3 million tons per year, a 47% reduction compared to the quota set in 2024, while doubling out-of-quota tariffs to 50%, replacing safeguard measures set to expire in June 2026.