On January 27, 2026, the European Union and India signed a Free Trade Agreement (FTA) in New Delhi, concluding almost 20 years of negotiations. It will bring together two economies representing around a quarter of the world’s population, 25% of global GDP and a combined market of almost 2 billion people. With bilateral trade in goods and services already worth 180 billion eurosthe FTA aims to double EU exports to India by 2032. Given the scale of the numbers involved and the fact that India is expected to significantly overtake Japan as the world’s fourth largest economyIt is no surprise that the President of the European Commission, Ursula von der Leyen, described the agreement as “mother of all affairs“.
Yet the EU-India FTA is less about economics or diplomacy than geopolitics. Its conclusion was driven largely by evolving geopolitical pressures from Washington and Beijing, which forced Brussels and New Delhi to reevaluate their strategic positioning.
For years, as negotiations bogged down, relations between the EU and India drifted without a clear geostrategic anchor. This has changed as global relations have changed dramatically with Donald Trump’s return to the White House and against the backdrop of China’s growing assertiveness in critical supply chains. These developments have forced Brussels and New Delhi to rethink their exposure to these strategic risks.
Trump’s new threats of tariffs, most recently against Greenland, have forced the EU to confront the limits of its dependence on the United States. Securing alternative markets is not just an economic calculation, but a geostrategic necessity. India, with its large consumer market, young population and growing manufacturing ambitions, presents itself as a particularly attractive alternative. This FTA could serve as a model for future trade deals with countries seeking to guard against overreliance on the United States and China.
India has also been exposed to risks from Washington’s increasingly transactional foreign policy. A long-time proponent of a rules-based international order that has underpinned its rapid economic growth, New Delhi found itself vulnerable under the new “America First” agenda. The previously warm personal relationship between Prime Minister Narendra Modi and Trump proved insufficient against a rapid deterioration in ties, highlighting the limits of Modi’s personalized diplomacy.
The pivotal moment occurred in June 2025, when Trump claimed credit for “resolving” the Indo-Pakistani military crisis and sought Nobel Prize nominations. Pakistan complied; India refused. Approving Trump’s speech would have risked damaging Modi’s strongman image and India’s insistence on bilateral crisis management. His refusal demonstrated a calculated assertion of strategic autonomy.
Washington’s subsequent use of economic pressure reinforced this reassessment. Successive rounds of tariffs, including measures targeting India’s purchases of Russian oil for refining and re-export, have resulted in tariffs totaling 50%. In New Delhi, these measures were widely seen as punitive and hypocritical, particularly given China’s exemption despite far greater imports of Russian energy. This episode accelerated India’s strategic recalibration, strengthening the case for diversifying economic partnerships and reducing exposure to an increasingly unpredictable United States.
The EU and India also face converging geostrategic challenges in their relations with China, making the FTA strategic and not just economic. While neither side can afford complete decoupling from Beijing, deeper economic integration between the EU and India could help alleviate vulnerabilities linked to trade imbalances, technological dependence and critical digital infrastructure. For India, these concerns are exacerbated by China’s role as Pakistan’s major defense partner and the unresolved border dispute dating back to the 1962 war, which continues to generate periodic military tensions. In this context, the FTA functions less as a strategic risk reduction mechanism and more as a policy catalyst to build resilience and self-reliance.
Crucially, the FTA came with a new security and defense partnership, adding another layer to the relationship. The partnership establishes a framework for cooperation in the areas of maritime security, cyber resilience, counter-terrorism and defense industry collaboration. For New Delhi, this offers enhanced maritime coordination with European navies, access to advanced European defense technologies and defense industrial investments, as well as deeper cooperation against cyber and hybrid threats. It also helps India reduce its dependence on Russian arms supplies and elevates India’s diplomatic standing within the EU’s Indo-Pacific strategy.
However, tensions remain. One of the key challenges to the partnership will be the EU’s expectation that India distances itself from Moscow, an outcome for which New Delhi has little appetite. The partnership spans more than five decades, during which Moscow has repeatedly supported India’s control over Kashmir at the UN Security Council, support that remains valuable for a country without a permanent seat.
Taken together, the EU-India FTA and the accompanying security partnership represent a strategic bet on a more balanced and diversified global economic and security architecture. They reflect a common geopolitical reality: as middle powers, neither Brussels nor New Delhi can navigate an increasingly fragmented international landscape alone. Whether these agreements will form the basis of a deeper, more lasting partnership will depend on sustained political commitment – and the willingness of both sides to demonstrate regulatory pragmatism.
Rajnish Singh is the Media Outreach Manager within the EPC Communications team.
The support that the European Policy Center receives for its ongoing operations, or specifically for its publications, does not constitute an endorsement of their contents, which reflect solely the opinions of the authors. Supporters and partners cannot be held responsible for any use that may be made of the information contained therein.
About The Author
