As the European Union seeks to reduce its dependence on imports, India, because of its potential could turn this biggest vulnerability into a golden opportunity.

In 2025, the European Union recorded a goods trade deficit of approximately €359.8 billion with China. The most dominant part of this dependence is manufactured products. In 2025, manufactured goods constituted 97.3% of EU imports from China, with machinery and vehicles alone accounting for 54.4%.

The EU obtains around 98% of its rare-earth magnet demand, 97% of the EU’s magnesium supply, and all its heavy rare-earth requirements from China. In solar photovoltaics, many foreign companies have historically controlled the global capacity across every stage of the supply chain.

Even where Europe has tried to reduce this exposure through trade measures, the costs and limitations of doing so are evident. The EU imposed additional countervailing duties on battery-electric vehicles ranging from 7.8% to 35.3%, on top of the existing 10% import duty. This indicated that tariffs could restrict to access to the European market but cannot instantly recreate the manufacturing capacity and supply chains that Europe currently lacks. The issue, therefore, is not simply that Europe buys a large quantity of imported goods. It is that it is held difficult-to-replace positions across multiple critical supply chains, making diversification far more complicated.

Before looking at India’s potential to act as an alternate in the EU, it is essential to look where it has already acted as one. Even amid these challenges, the United Kingdom offers a useful precedent.

The India-UK CETA, signed in 2025, slots neatly into this picture too. It scraps tariffs on almost all Indian exports to Britain, and analysts have been blunt about it.

It acted largely alone and without the scale or leverage of a 27-member bloc. Yet this mid-sized economy managed to build alternative markets. It also reduced its tariff exposure and risk on a handful of accounts.

India looks like the natural partner to build it around. Europe’s exposure to remains far deeper than Britain’s in electronics, solar components, pharmaceuticals, and rare earths.

India has the scale, workforce, and growing industrial base to absorb a meaningful share of that dependency. However, the smarter move isn’t attempting a wholesale switch overnight. A more effective approach would be to begin with a small number of carefully selected sectors.

India’s electronics assembly and components industry has grown rapidly, particularly around hubs such as Tamil Nadu and Karnataka. It could also expand its role in active pharmaceutical ingredients, building on its position as a major supplier of generic medicines. Textiles offer another opportunity, as Gujarat and Tamil Nadu already have the manufacturing infrastructure needed to handle greater demand. Rather than trying to negotiate one EU-wide framework, individual member states could first build deeper ties with two or three Indian states. Using those as proof-of-concept before scaling continent-wide. Much like the UK’s CETA and CPTPP approach, which built momentum gradually rather than all at once.

India still faces significant infrastructure and regulatory challenges of its own. But the direction is clear enough. Europe has every reason to follow that same gradual approach.