EU will ask India to cut tariffs on cars, wine to boost ties, reduce reliance on China

New Delhi: The European Union plans to urge India to lower its high tariffs on cars and wine to boost trade, as it seeks to reduce its reliance on China, a senior official from the bloc said, ahead of a visit by the European Commission president to New Delhi.

Echoing US President Donald Trump's threat of reciprocal tariffs, the official said the EU would press India to cut tariffs on some goods and broaden market access for its products, while offering flexibility on agriculture issues to expedite free trade agreement talks.

"The Indian market is relatively closed, especially to key products of commercial interest to the European Union and our member states’ industries, including cars, wines and spirits," said the official, who requested anonymity due to the confidential nature of the discussions.

EC President Ursula von der Leyen's two-day visit from Thursday, accompanied by leaders of EU member nations, coincides with escalating geopolitical tensions, with Brussels and New Delhi set to outline key areas for deeper cooperation under their strategic partnership.

Leyen will meet Indian Prime Minister Narendra Modi on Friday, followed by discussions with trade minister Piyush Goyal.

The next trade negotiations round is scheduled for March 10-14 in Brussels.

The EU's call for lower tariffs comes amid Trump's threats to impose reciprocal tariffs from early April, which has caused anxiety for India's exporters. Analysts from Citi Research estimate potential losses of about $7 billion annually.

The EU is India's largest trading partner in goods, with trade nearing $126 billion in 2024, marking an increase of about 90% over the past decade.

Reducing Reliance on China

As part of its "de-risking" strategy, the EU aims to strengthen economic and security ties with India, diversify supply chains, and reduce reliance on key products from China.

The EU also views India as a vital ally in addressing security challenges, the official said, including cyber threats and tensions in the South China Sea and Indo-Pacific.

Leyen is also expected to seek India's support for a "peaceful and just deal" for Ukraine's security, the official said.

The EU and India could sign an agreement to share classified security information to tackle common threats such as cyber attacks and terrorism, while exploring defence equipment trade.

Despite these potential benefits, trade analysts said the visit may not yield tangible results.

For substantial cooperation, the EU should acknowledge India as a data-secure country, said Ajay Srivastava, founder of the Delhi-based think-tank Global Trade Initiative, and India's former negotiator on trade talks with the EU.

"While both parties have concerns about China, neither sees it as a top priority," Srivastava said adding India is focused on border tensions with China, while the EU is more concerned with the Ukraine-Russia conflict and NATO matters.