The US and the EU are deepening trade, technology, defense and critical minerals ties with India as they seek to diversify supply chains and reduce their reliance on China.
Western efforts to strengthen ties with India are increasingly driven by economic and strategic necessity. While Washington has traditionally emphasized security cooperation and Brussels has focused on trade and regulation, both are pursuing a similar goal: building alternative supply chains for critical minerals, semiconductors and other strategic goods.
India’s expanding economy, industrial capacity, skilled workforce and large domestic market make it an attractive partner. For Western governments, closer integration with India offers a way to reduce exposure to China while creating new markets for their companies.
The EU bets on trade and industrial cooperation
The European Union has made trade a central part of its strategy. In January 2026, Brussels and New Delhi concluded negotiations on a landmark free trade agreement after years of talks. The deal is expected to be signed in December 2026 and enter into force in early 2027.
The agreement would eliminate or reduce tariffs on 96.6% of EU goods exports to India by value. Bilateral trade reached €192 billion in 2025, while the EU’s foreign direct investment stock in India stood at €132 billion in 2024, making the bloc the country’s largest foreign investor.
Beyond expanding market access, Brussels wants to build more resilient production networks. European companies can contribute capital, industrial technology and advanced manufacturing expertise, while India offers a growing industrial base and a substantial pool of skilled workers.
However, differences remain over the EU’s Carbon Border Adjustment Mechanism (CBAM), which imposes a carbon-related charge on imports of emissions-intensive products such as steel and aluminium. India argues that the measure could disadvantage its industrial sector. The trade agreement does not exempt India from CBAM, although the EU has offered technical assistance to help Indian industries reduce emissions.
Critical minerals at the centre of the strategy
Securing critical raw materials is another priority for Europe, which wants to reduce its dependence on China for the processing of minerals essential to clean energy technologies and advanced manufacturing.
EU member states, including Italy, the Netherlands and Germany, have already established cooperation arrangements with India covering exploration, processing, recycling and supply-chain resilience.
India’s resource potential includes a reported 5.9 million metric tonnes of inferred lithium-bearing ore in Jammu and Kashmir, identified by the Geological Survey of India in 2023. The country also holds licences to explore seabed deposits containing nickel, copper and cobalt.
Turning these resources into commercially viable supply chains will require years of investment. European financing and technology could help India develop its mining and processing industries, potentially securing long-term supplies for European manufacturers.
The EU is also supporting proposals for a critical minerals club to establish common standards for responsible mining and processing. The broader objective is to develop alternative supply networks that are less vulnerable to Chinese dominance.
India becomes a technology partner
Semiconductors are another area in which Europe sees India as a potential partner. The European Chips Act aims to double the EU’s share of the global semiconductor market by 2030, but the bloc faces gaps in manufacturing capacity and skilled labour.
India, meanwhile, is expanding its semiconductor ambitions through a government-backed programme with an approved budget of about $13 billion for a new phase of development.
The EU and India launched a Trade and Technology Council in 2023 and signed an agreement to cooperate on semiconductor ecosystems, supply chains and innovation. Subsequent discussions have covered semiconductors, solar technology, pharmaceuticals and other strategic industries.
For Europe, such cooperation could diversify supplies of chips used in sectors including automotive manufacturing while strengthening links between Indian engineers and European technology standards.
Washington combines trade with security
The United States has traditionally approached India through defense cooperation and its wider Indo-Pacific strategy, including collaboration through the Quad. But trade and industrial ties have become increasingly important.
In February 2025, the two countries announced Mission 500, setting a target of more than doubling bilateral trade to $500 billion by 2030. They also began negotiations on a trade agreement intended to improve market access and reduce tariff and non-tariff barriers.
The process has been complicated by trade tensions. Washington imposed tariffs of up to 50% on Indian goods in August 2025, partly in response to India’s purchases of Russian oil. In February 2026, the two sides agreed to reduce the rate to 18% under an interim framework. The US Supreme Court subsequently struck down the tariffs, leaving most Indian exports subject to a 10% duty. The interim agreement remains unsigned.
The dispute reflects a longstanding US concern that India’s tariff system and regulatory barriers restrict access for American companies. Washington therefore views closer economic ties not only as a strategic opportunity but also as a way to expand exports to the Indian market.
Critical minerals link US and Indian interests
In May 2026, Washington and New Delhi established a Strategic Critical Minerals Cooperation Framework covering mining, processing, recycling and financing.
India wants to strengthen its domestic capacity and reduce vulnerabilities in the supply of strategic raw materials. The United States, meanwhile, sees opportunities for its companies to provide mining equipment, technical services, technology and investment.
Rather than simply sourcing raw materials from India, the two countries could develop domestic Indian value chains linked to wider US production networks. Such an approach would give India a greater role in processing and manufacturing while helping American industries diversify their supplies.
A partnership driven by mutual necessity
Despite differences in policy and periodic trade disputes, the EU and the US share a central objective: reducing strategic dependence on China by building stronger economic links with India.
The relationship is transactional rather than unconditional. Western governments want access to India’s market, minerals, technology and manufacturing capacity, while New Delhi seeks investment, industrial development and greater strategic autonomy.
Whether these ambitions translate into lasting supply-chain alternatives will depend on investment, regulatory compromises and India’s ability to expand domestic production. For the West, however, the underlying calculation is increasingly clear: reducing reliance on China will require partnerships with major economies beyond its traditional allies, and India is emerging as one of the most important.
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