Geopolitical Shift: EU-India Deal as a Strategic Hedge Against China and US Tariffs

The EU-India Free Trade Agreement (FTA), concluded on January 27, 2026, is far more than an economic pact. It is a calculated geopolitical move in an era of rising protectionism, supply-chain fragility, and superpower competition. By linking nearly two billion people and roughly one-quarter of global GDP in a preferential trade zone, the deal serves as a hedge against two major uncertainties: aggressive U.S. tariffs under President Donald Trump’s second term and continued over-reliance on China for manufacturing and critical inputs.EU Commission President Ursula von der Leyen described the agreement as part of building a “strategic relationship” with India that extends well beyond commerce into security, defense, and technology cooperation. For India, the deal diversifies export markets at a moment when 50% U.S. tariffs threaten key sectors. Together, both partners are signaling that cooperation among like-minded democracies can counter coercion and preserve open, rules-based trade. This article examines how the FTA functions as a geopolitical instrument.

Rising Protectionism Forces New Alliances

Global trade has become increasingly weaponized. Russia’s 2022 invasion of Ukraine triggered energy shocks and exposed supply-chain vulnerabilities. The return of Donald Trump in 2025 brought back “America First” tariffs, including 15–25% on EU goods and up to 50% on Indian exports, often linked to geopolitical leverage such as India’s continued purchase of Russian oil.

In response, the European Union has pursued “strategic autonomy,” signing trade deals with Japan, Indonesia, Mexico, Mercosur partners, and now India to reduce dependence on both the U.S. and China. India, meanwhile, has accelerated FTAs with the UK, Oman, Australia, New Zealand, and the EU to offset potential U.S. market losses and position itself as a manufacturing alternative under “China+1” strategies.

The EU-India FTA fits perfectly into this pattern: a middle-power alignment designed to insulate both economies from the volatility of great-power politics.

Countering Trump-Era Tariffs

Trump’s tariff threats have acted as a powerful catalyst. Facing 50% duties on textiles, gems, jewelry, and marine products—sectors that account for a large share of India’s U.S. exports—New Delhi urgently needed new markets. The EU, with its 450 million affluent consumers, offers an ideal alternative.

For European exporters, the deal secures preferential access to India’s fast-growing market, shielding them from transatlantic friction. Tariff reductions on 96%+ of EU goods exports to India and reciprocal liberalization for Indian products create a buffer against U.S. punitive measures.

Analysts have called the pact a quiet “rebuff” to Washington’s unilateralism. By institutionalizing deeper economic ties, the EU and India reduce the leverage that tariff threats can exert. In a multipolar world, such hedging strengthens the bargaining power of both parties.

Diversification Away from China

China’s dominance in global manufacturing, rare-earth elements, and intermediate goods has long worried both Brussels and New Delhi. The EU has explicitly adopted a “de-risking” strategy, while India aims to attract redirected investment through production-linked incentives and improved infrastructure.

The FTA accelerates this shift. Lower tariffs enable European firms to source components, machinery, and final products from India instead of China. Indian manufacturers gain technology transfers, joint ventures, and access to European supply chains in autos, renewables, electronics, and pharmaceuticals.Combined with parallel initiatives—such as the EU-India Connectivity Partnership and defense dialogues—the agreement helps build “trusted” ecosystems less vulnerable to Beijing’s export controls or geopolitical pressure.

From Trade to Strategic Partnership

The FTA is accompanied by a new EU-India security and defense partnership, modeled on similar frameworks with Japan and South Korea. Discussions include joint capability development, supply-chain integration for defense equipment, maritime security in the Indo-Pacific, and cooperation on critical technologies.

This elevation of ties reflects shared interests: upholding a rules-based international order, countering hybrid threats, advancing climate goals, and ensuring open sea lanes. While neither side seeks formal military alliance, the deepening cooperation signals convergence between two major democracies facing common strategic challenges.

Challenges Ahead

Implementation will not be seamless. The deal still requires ratification by the European Parliament and Indian authorities. Sensitive issues—such as the EU’s Carbon Border Adjustment Mechanism (CBAM), which could raise costs for Indian steel and aluminum exports—will need careful management.

Yet the strategic logic remains compelling. In an age of fragmentation, the EU-India partnership demonstrates that middle powers can protect their interests through cooperation rather than confrontation.

A Blueprint for Resilience

The EU-India FTA is a geopolitical pivot as much as an economic one. By hedging against U.S. tariff unpredictability and Chinese supply-chain dominance, it fosters diversification, strengthens strategic alignment, and reinforces a multipolar order grounded in mutual benefit.

As global uncertainties mount, such partnerships offer a model for navigating turbulence: not through isolation or bloc confrontation, but through deeper, rules-based cooperation among democratic economies. For both the EU and India, this “mother of all deals” is a bet on resilience through partnership.