The European Union is moving to lock in a sweeping trade and security agreement with India, exploiting US tariff pressure to tilt one of Asia’s biggest economies further away from Washington’s orbit.

Branded a landmark free-trade pact alongside a defence partnership by the Europeans and European media reporting, the deal is less a gift to India than a strategic win for Brussels.

For the EU, the logic is blunt. Access to India’s fast-expanding market offers relief for European manufacturers squeezed by Chinese competition and US protectionism.

Lower Indian tariffs on cars and alcohol as DW reported recently as well as industrial goods would deliver immediate gains to European exporters in these and other sectors, while labour mobility arrangements would help plug chronic workforce shortages across the bloc. The agreement also strengthens Europe’s hand in setting standards across pharmaceuticals, technology and supply chains tied to future growth.

India’s benefits would be narrower and more defensive though. New Delhi is still scrambling to offset the impact of punitive US tariffs that have hit textiles and consumer exports. The EU offers an alternative outlet, but on terms that favour European industry and regulatory power. This imbalance in the short term at least reflects Europe’s position as India’s largest trading partner in terms of goods – consuming 12.2% of India’s trade in goods in 2023 – and a market New Delhi cannot afford to alienate.

Geopolitics at play

The geopolitical consequences may be more significant, however. By deepening economic and defence ties with Brussels, India reduces its exposure to US financial leverage and trade pressure. That loosening grip gives New Delhi greater room to manoeuvre internationally, making closer alignment with BRICS and the broader Global South easier to pursue without risking immediate economic retaliation from Washington.

Efforts to forge a comprehensive free trade agreement between the European Union and India have been among the most protracted in modern diplomacy. Negotiations first began in 2007, only to stall in 2013 amid disputes over market access, tariffs and regulatory standards. Talks resumed in earnest while COVID was at its peak in 2022, set against a backdrop of shifting global trade patterns. This has led to the current round of discussions bringing the deal closer to reality than ever before, with the EU’s top leadership openly championing its potential to reshape economic relations with Asia.

European Commission President Ursula von der Leyen has cast the pact as pivotal for both sides. In a recent message posted on the social media platform X, she stated that the EU and India had chosen a “The choice of strategic partnership, dialogue and openness.”

At time of typing she has even ‘pinned’ the message  “The mother of all trade deals. We are closing in on the Free Trade Agreement. See you soon in Delhi.” to the top of her X account, and in a video aimed at promoting the deal says the world is on the “cusp of a historic trade agreement”.

As such, Brussels no doubt sees the agreement as a way to diversify trade links and reduce its dependence on China, while also signalling unity with long-standing partners such as the United States. The EU believes that deepening economic engagement with India will bolster global supply chains and offer alternatives to the polarised dynamics of US-China competition.

Yet this strategic framing carries unintended consequences. By positioning the EU–India free trade agreement in part as a complement to Western cohesion, Brussels risks overlooking New Delhi’s own diplomatic calculus. India has been quietly pursuing a more independent course, strengthening ties with emerging markets and fostering multi-currency trade within the Global South. Its leadership in New Delhi has expressed a desire to reduce reliance on the US-dollar-centric system and expand economic links with partners across Asia, Africa and Latin America. These are all moves that sit uncomfortably with a narrative anchored in alignment with Western blocs and in particular US dollar diplomacy.

The broader context of India’s reserve diversification away from US Treasuries, as reported by Bne IntelliNews, and engagement in BRICS-related initiatives suggests a gradual reorientation of its strategic preferences.

To this end, if Brussels misreads this as simple acquiescence to US-aligned strategy, it may underestimate the depth of India’s intent to balance multiple partners. New Delhi is unlikely to sign any agreement that appears to tether it too closely to Western economic priorities at the expense of its autonomy in the Global South.

The result is thus simple. The FTA, if concluded, could be a landmark in global trade. But the way it is framed could be just as important as its terms, affecting not only bilateral ties with Europe, but India’s broader geopolitical alignment and southern shift.