Courting India: Why the European Union’s Economic Pivot Matters

As America’s protectionism grows, the EU finds a new strategic ally in India.

For decades, the European Union (EU) has carefully balanced its transatlantic alliance with economic pragmatism, relying heavily on the United States for security and trade while maintaining a cautious yet lucrative relationship with China. But now, the winds of global commerce are shifting. With Washington’s increasingly protectionist stance under Donald Trump, manifested through stiff tariffs on European goods, and growing disillusionment with Beijing’s economic practices, Brussels is looking eastward to New Delhi. The high-profile visit of European Commission President Ursula von der Leyen to India last month signals a turning point besides signalling the EU’s keeness on deepening economic and strategic ties with the world’s fastest-growing major economy.

The centerpiece of this rapprochement is the revival of the long-stalled India-EU free trade agreement (FTA). Negotiations, languishing for over a decade, have gained new urgency as both sides recognize their shared interests in countering China’s influence in the Indo-Pacific, strengthening supply chains in critical sectors like semiconductors and artificial intelligence, and reducing reliance on unpredictable American trade policies. In short, Europe’s economic anxieties are becoming India’s opportunity.

Relationship Reborn

For India, the EU is not just another trading bloc but its largest partner, accounting for $137 billion in annual trade. If the FTA materializes, this figure could triple over the next decade, making the partnership one of the most consequential economic alignments in modern history. Unlike China, which dominates through state-backed enterprises and coercive economic policies, India offers Europe a rules-based, democratic alternative.

The timing is propitious. The EU’s quest for a more diversified economic portfolio coincides with India’s ambition to become a global manufacturing hub, as envisioned by Prime Minister Narendra Modi’s Make in India initiative. European investors are already flocking to India, with over 6,000 companies generating millions of jobs. From automotive giants like Volkswagen to green tech pioneers in wind and solar energy, European businesses see India not just as a market but as an indispensable partner in the race toward sustainability and technological innovation.

Europe’s growing warmth toward India is also driven by geopolitics. Donald Trump return’s to the White House has signaled a return to economic nationalism, with the U.S. president threatening 25 percent tariffs on European goods. His hostility towards NATO allies, coupled with his transactional approach to global diplomacy, has forced European leaders to reconsider their dependency on Washington.

For the EU, the prospect of economic arm-twisting from the U.S. has made India an attractive hedge. Unlike China, which the EU views with increasing suspicion due to its aggressive industrial policies, India offers a democratic counterweight that shares European concerns about China’s expansionist ambitions in the Indo-Pacific.

Trade alone does not define this budding alliance. Security considerations are equally crucial. Much like Japan and South Korea, the EU now sees India as a pivotal security partner in the Indo-Pacific. Brussels, which traditionally viewed the region through a narrow economic lens, is now aligning with India to curb China’s assertiveness in maritime territories. The EU’s Indo-Pacific strategy, released in 2021, underscored the need for deeper naval cooperation with regional democracies, and India is at the forefront of this equation.

For India, which has long sought greater European involvement in balancing China, this is a welcome shift. New Delhi understands that an economically engaged Europe in the Indo-Pacific is not just good for trade but strengthens the larger geopolitical framework that limits Beijing’s influence. From joint naval exercises to intelligence-sharing mechanisms, the India-EU partnership is expanding beyond commerce into the realm of strategic deterrence.

Strategic Future

Ironically, this burgeoning partnership is unfolding against the backdrop of history. India’s colonial past with European powers - especially Britain, France and Portugal - once defined its economic and political struggles. Today, these same countries are eager to invest in India’s future. Last year, India signed a treaty with the European Free Trade Association (EFTA), a smaller bloc of four European nations. That agreement, though less ambitious than the larger FTA in the works, marked a significant shift in European confidence in India’s economic trajectory.

For India, this newfound European enthusiasm represents a moment of strategic redemption. No longer merely a post-colonial state navigating the global order, India is now a technological powerhouse, producing over a million engineers annually and driving some of the world’s most cutting-edge innovations. Europe’s pivot to India is a recognition of this reality.

Of course, challenges remain. European regulators are known for their stringent trade standards, and negotiations over intellectual property rights, data privacy and labor laws will be contentious. India remains wary of European agricultural protectionism and strict environmental regulations that could limit its export potential. However, the political will on both sides suggests that these hurdles are not insurmountable.

Beyond the technicalities of trade negotiations, the India-EU relationship represents a recalibration of global power dynamics. As the U.S. retreats into protectionism and China becomes an increasingly unreliable partner, the EU and India are forging a new axis of economic and strategic cooperation. The long-pending FTA negotiations, which once seemed destined for diplomatic oblivion, now appear poised for a revival. Both Brussels and New Delhi see this as an essential step toward countering Chinese influence. If they succeed in finalizing an FTA, it would mark a turning point not just for India and Europe, but for global trade realignments in the 21st century.

(The author is a researcher and expert in foreign affairs. Views personal.)