INTRODUCTION
Is it time for the U.S. to exit NATO? This is a question which, if asked a decade back, would have been outrightly rejected by the world media and field experts, but it is at the centre of global geopolitical debates now. It all heated up with a single tweet from Elon Musk, “I agree” on March 2nd, 2025. It was his response to a post advocating for the U.S.A. exit from NATO and the United Nations. It was a reflection of the changing trend and sentiment of the Washington office under the Trump administration. Musk, whose influence now extends beyond the business empire, has become a voice not to be taken lightly. He plays a key role in redefining how the U.S. views its alliances.
Musk’s statement aligns with Donald Trump’s long-standing criticism of NATO, he calls it a “drain on American resources.” The U.S. withdrawal from NATO will trigger a geopolitical earthquake, and have a direct impact on Europe, weaken their military deterrence, sharpen Russia’s territorial ambition, and force NATO to either dissolve or restructure itself without the U.S. leadership. This move will not just have its impact in a cluster, rather it will impact global powers like Russia, China and emerging global powers like India. These countries would need to reassess their strategic positions in this shifting world order.
India has a significant advantage over other countries to leverage its position. American Geopolitical Expert and Political Scientist Ian Bremmer has remarked that India currently has the best geopolitical position among all the major countries of the world, where he highlighted the situations where India has fared better, taking the example of being able to purchase oil from Russia, and also highlighted how, despite that, India has good relations with USA, Japanese and Europeans. Observations by the ORF show that India’s unique position and strategic non-alignment help India’s autonomy in making decisions and the ability to maintain relations with the West as well as Russia. The CEBRI also recognized the strong role India played its role as the voice of the Global South at the G20 summit of 2023. This strategic non-alignment and unique diplomatic position of India might be helpful for India as a leader in case of a void left by the USA, where India, being in its unique position of having good relations with the West and Russia, would get significant support from both sides, while also receiving support from the Global South.
Larry Kramer, president and vice chancellor of the London School of Economics, recognized the influence of India and remarked that India can be a global leader and can fill the void of the USA in global leadership, in case of withdrawal of the USA. The policies of the Trump Government, advocating for America First, and the instances of withdrawal from various international organizations, are creating a situation which might lead to a void in the global leadership and this ambit acts as an opportunity for India, given its unique position at the geopolitical level and relations with the major countries, to take the lead and emerge as a leader.
For India, the shift brings both risks and unparalleled opportunities. With this stance of the U.S., the European Nations find themselves in a spot of bother. They desperately need to look for new economic and defence allies. India is a rising global power. We are geopolitically perfectly placed with deepening ties with both the EU and the U.S. We can emerge as a key partner in a restructured global security and trade scenario.
Although various scholarly works have independently examined the India-EU Free Trade Agreement negotiations and the United States’ strategic disengagement from global security frameworks like NATO, only a few analyses have interlinked these developments to assess the rare geopolitical convergence currently underway. This article situates India not as a passive observer but as a potential anchor in the changing economic-security landscape emerging from a disintegrating U.S.-EU axis and, in doing so, fills a gap by contextualizing India’s economic and strategic prospects within the broader reconfiguration of transatlantic alliances.
In this article, the authors will look into why the U.S. is considering NATO withdrawal, and how this strategic shift currently in play is a rare and real opportunity for India for its economic expansion and strategic advancement in the world. We will be looking at the potential of India- EU trade, analysing the legal hurdles India can face while establishing itself in the EU market and its potential solutions which would ensure that India not only enters in the large European market but makes itself a key European ally expanding its economy and growing its reach in the process.
The U.S. and NATO: Why Is an Exit Becoming a Real Possibility?
The idea that the United States should withdraw from NATO has, with time, transformed from being a speculative notion to a serious strategic discussion of policymakers of the state. This shift is the result of the present political, economic, and strategic factors of the U.S. that have collaboratively challenged the foundation of the alliance that stood indestructible for over seven decades. The current U.S. President has been a strong critic of the organization reason being the economic disparity among the participating nations. The “America First” policy, which Trump has reiterated many times during his election campaign, calls for a reduction of engagement in the international sphere to focus on national priorities.
The exit of the USA from Afghanistan in 2021 showed a glimpse of what might follow in the future, where the USA almost spent $825 billion on military in Afghanistan, and also $130 billion on reconstruction projects. The cost, including those of war and other commitments in Afghanistan, was about $2.3 trillion. The financial pressure because of Afghanistan was considered a significant loss of resources, and the exit from Afghanistan was a shift in policy where the USA thought of concentrating on its domestic challenges instead of focusing on other international obligations. This shift indicated that the USA in the future might withdraw from more places, which would put pressure on its resources.
As of 2024, the United States accounts for 63.7% of NATO’s total defence budget, giving a huge sum of $754.68 billion, while Canada, along with all other European members, contributes $1.18 trillion. During various NATO summits, the U.S. has repeatedly asked other members to scale their respective defence budgets to a 2% GDP defence spending benchmark. While Poland (3.9%) and the United Kingdom (2.7%) have adhered to the requirement, economies like Spain (1.28%) and Belgium (1.30%) remain below the threshold. This has made NATO a one-sided security arrangement where the bulk of Europe enjoys on U.S. defence costs.
Domestic economic pressure and shifting global priorities have played their part too. As of March 5, 2025, the U.S. gross national debt reached $36.22 trillion, with debt held by the public being 28.9 trillion and intergovernmental debt being $7.31 trillion. The Congressional Budget Office (CBO) projects that this debt will rise from 99% of GDP in 2024 to 116% by 2034 driven by escalating interest and spending.
China increasing its military presence in the Indo-Pacific is also a matter of concern for the U.S. In February 2025, the Chinese Navy sent a task force including the Jiangkai-class frigate Hengyang and the Renhai-class cruiser Zunyi to conduct live-fire drills in Australia’s exclusive economic zone in the Tasman Sea. This, combined with North Korea’s on-going tussle, has made Washington reconsider its resource allocation.
These geopolitical developments show why a U.S. exit from NATO is no longer a hypothetical scenario but a real possibility.
India’s Golden Moment: Capitalizing on the Global Realignment of Power
In a fast-changing geopolitical scenario, India has come to be recognized as an emerging global power with a unique standpoint. Unlike today, where many global players have aligned themselves with either Western or Eastern blocs of power, India has carefully navigated its way to a balanced foreign policy. It balances both the Western and the Eastern blocs, marching forward.
One of the most evident examples of India’s autonomy is its approach during the Russia-Ukraine war. Regardless of immense Western pressure, India continued economic and defense ties with Russia. Not only did India purchase Russian oil at a favourable price, but it also went ahead and acquired the S-400 air defence system despite U.S. demands to go for THAAD instead. This independent approach makes India a natural choice for European countries.
Russia, as we all know, is a strong ally of India and has been called a longstanding and time-tested partner of India. India serves as a good option for the EU in terms of safeguarding its interests.
It is a well-known fact that before the annexation of Crimea and the Russia-Ukraine War, EU was the largest trade partner of Russia, with dependence on the energy sector. The fallout after the Russia-Ukraine war was so intense that the EU declared Russia a State sponsor of terrorism and Russia listed all the countries of the EU and NATO countries, except Turkey, under its list of “unfriendly countries”. The EU was dependent on Russia for gas supply through the Nord Stream pipeline, and after Russia stopped supplying gas from the Nord Stream Pipeline, USA became a supplier to the EU.
EU faces constant pressure from USA due to its dependency which started from Russia-Ukraine War, and India can be an influencing factor for EU by acting as a mediator and helping in the normalization of trade relationship between Russia and the EU and thereby decreasing EU’s dependency on USA in these critical times and restoring EU and Russia ties
With uncertainty surrounding NATO’s future and the Europe-U.S. trade relationship, recent actions show that it has already begun searching for feasible alternatives and India has emerged as a crucial strategic ally of the EU. On 27-28th February 2025, European Commission President Ursula von der Leyen visited India and both parties finalized the long-pending Free Trade Agreement (FTA), which will conclude towards the end of the year. The aim of the agreement is to increase trade, technology cooperation, connectivity, and defence, making it one of the largest global trade pacts to be signed by two parties.
The attempt of EU to diversify its trade relationships got further justified when, on April 2, Donald Trump imposed tariffs on products imported to the USA, calling that day “Liberation Day”, to correct the unfair trade, creating disadvantage for the USA. This tariff imposition also engulfed the EU, where a tariff of 20% was imposed on the products imported from EU nations. The step taken by Donald Trump was a move to take action against those countries that have a surplus in trade with the USA, which affected several countries.
The action by Donald Trump of imposing tariffs on the EU was met by negative retaliations, where the chairman of the International Trade Committee Chair, Mr. Bernd Lange, commented that the EU should take action and impose tariffs on digital services where the USA has a surplus. The public perception of the USA in the EU changed rapidly after the imposition of those tariffs, as the survey conducted by YouGov revealed that a majority of Europeans were in favor of retaliatory tariffs being imposed on the USA, where a staggering 76% of people in Denmark favored the same. On 9th April, the retaliatory tariffs of 25% were imposed on the USA by the European Commission after receiving support from the EU Member States.
This situation could be seen as the beginning of a full-fledged trade war between the USA and the EU countries, which could translate into an opportunity for India, where the rift between them could be used by India to leverage its position in the EU.
India has, over the years, worked on deepening its relations with EU nations. India has signed a submarine project with Germany, where ThyssenKrupp and Mazagon Dock Shipbuilders Ltd. have become the number one contenders for a $5 billion project to build six advanced conventional submarines. In October 2024, India and Spain launched a $2.5 billion Tata-Airbus plant at Gujarat to manufacture Airbus C-295 military aircraft. India will get its first ‘Make in India’ C295 in September 2026.
The FTA will increase the AI, semiconductor, and cyber security collaborations, aligning with India’s $10 billion semiconductor initiative. The EU has set its net-zero carbon emissions target to be achieved by 2050, and India’s green hydrogen sector is attracting major European investments.
India-EU bilateral trade stood at €115.4 billion in 2022, with the EU being India’s second-largest trading partner (10.8% of total trade). However, India is the EU’s 9th-largest trading partner as of 2023, which indicates huge potential for trade between the two nations. The FTA is projected to increase India’s exports to the EU by 52-56% and EU exports to India by 33-35%, indirectly supporting 5 million jobs in IT, green energy, and advanced manufacturing, India with its unique autonomy and healthy economic growth trajectory is well positioned to capitalize on this opportunity.
Along with India, some other developing countries stand to benefit from the shift underway. Countries like Brazil stand to benefit from the EU’s efforts to diversify their trade relationship. The potential ratification of the EU-Mercosur trade agreement could enhance Brazil’s exports, particularly in the agriculture and green energy sectors. Brazil’s finance minister has highlighted the country’s strong bilateral relationships with major economic blocs, positioning it to withstand global trade tensions.
Similarly, Vietnam is attracting increased attention from the EU as an alternative trade partner. European leaders, including Ursula von der Leyen and Emmanuel Macron, have planned visits to Vietnam to strengthen ties amid uncertainties in U.S.-Vietnam relations due to potential tariffs. This initiative aims to create new trade opportunities and investment prospects with trusted partners.
If countries like India, Brazil, and Vietnam can address the existing challenges, such as tariff inconsistencies and regulatory frameworks, and align them with the international trade standards, these nations can fully benefit and come up as a good alternative for the EU that is desperately looking for alternatives given its uncertainty with the U.S.
Strategic Risks: Challenges India Faces in Establishing a Strong Presence in the EU Market
As India tries to strengthen its grip as a key economic and strategic partner to the EU, the challenges in front of it are immense, ranging from geopolitical webs to strict rules and regulations of the EU itself. The Carbon Border Adjustment mechanism regulation (EU Regulation 2023/956), which came into effect in October 2023, requires importers of steel, cement, fertilizers, and hydrogen to report carbon emissions. From 2026, the Indian manufacturer will have to pay a carbon tax. India will have to follow the EU’s CBAM despite following the Perform, Achieve, and Trade (PAT) scheme under domestic laws. The EU also doesn’t recognize India’s emission trading system, which means that Indian firms must pay additional tax even if they comply with India’s domestic regulations.
The EU’s GDPR (Regulation (EU) 2016/679) restricts cross-border data transfer and places strict compliance criteria on IT firms handling EU citizens’ data. Indian firms are required to store EU customer data on European servers, which increases operational costs. The Data Protection Board of India’s 2023 draft framework doesn’t meet the EU’s adequacy standards, letting India to not rely on domestic data laws for compliance. Various companies like Uber, Meta, etc. have faced penalties from the EU for violating GDPR.
India is a major pharmaceutical and textile exporter to Europe, but the EU has imposed anti-dumping duties on several Indian Products. The EU has from time to time imposed anti-dumping charges on India. India’s generic pharmaceutical industry faces criticism under the EU’s Supplementary Protection Certificate (SPC) Regulation. This gives European pharmaceutical companies an unfair advantage over Indian companies. It has also initiated an investigation into Indian steel exports under its “Dumping Margin” rule.
In addition, the United States and China will keep an eye on India’s actions in the EU market. Strong India-EU ties will have an impact on the vested interest of both countries, which have made enormous investments in the region.
Way Forward: Strategic and Legal Solutions for India’s Expansion in the EU Market
As India looks to establish itself as an essential economic and strategic partner to the European Union, it must address regulatory challenges and trade restrictions that can potentially come in the way. If we have to successfully tackle these issues, it would require a combination of legal negotiation, strategic trade agreements, and diplomatic strategies to make sure that India’s presence in the European market is both sustainable and influential.
One of the primary hurdles is the Carbon Border Adjustment Mechanism (CBAM) regulation (EU Regulation 2023/956), which imposes additional taxes on carbon-intensive goods like steel, cement, fertilizers, and hydrogen. To counter this, India should push for a Carbon Tax Offset Agreement where its domestic carbon standards are recognized under the EU trade law. Establishing a government-backed CBAM system would help Indian manufacturers to meet the EU’s tough carbon regulations.
The second major regularity challenge is the General Data Protection Regulation (GDPR) (Regulation (EU) 2016/679. It imposes strict data localization and cross-border transfer restrictions on the Indian IT firms that handle European citizens’ data. India should press for a Data Adequacy Agreement with the EU. Japan and South Korea have already taken such a route. It shall allow seamless cross-border data transfer without relocating servers. India, along with the EU, can establish India-EU data hubs co-regulated by both India’s Data Protection Board and the European Commission. It would ensure faultless data protection compliance from the Indian firms that would meet the EU storage mandates.
India’s pharmaceutical and textile exports face many challenges due to the EU’s anti-dumping policies that impose unfair tariffs and restrictive trade measures. Through its policy, it repeatedly targets Indian generic pharmaceuticals under its Supplementary Protection Certificate (SPC) Regulation. India has already previously challenged these anti-dumping policies in a notable case, ‘DS141: European Communities — Anti-Dumping Duties on Imports of Cotton-Type Bed Linen from India.’ The WTO ruled in favour of India, leading the EU to amend its regulations. India should ensure that the India-EU Free Trade Agreement (FTA) includes exemptions for pharmaceuticals and textiles, which prevent unfair trade restrictions.
But not everything is as straightforward as it appears. While these strategic agreements are a real possibility, there are various factors with which the country has to cross paths to get an easy way out of the EU’s stringent regulations.
One of the primary reasons for the EU’s resistance to acknowledging India’s offset system is the structural difference between the two mechanisms. While the EU’s ETS (Emissions Trading System) is a cap-and-trade system focusing on absolute emission reductions, India’s PAT (Perform, Achieve, and Trade) scheme focuses on energy efficiency improvements without a fixed cap on emissions. This divergence complicates the EU’s ability to equate the two systems, leading to the body being hesitant to grant equivalence or exemptions under CBAM.
The other issue that complicates the whole process is the internal politics within the EU. Member states have varying priorities and economic interests, which can influence their stance on CBAM’s effective implementation. For example, France has been a strong advocate for stringent CBAM measures to protect its industries and uphold environmental standards. On the other hand, Poland has voted against the CBAM in the EU council, where it said that CBAM, being a fiscal mechanism, requires the unanimous approval of all EU member states. These contrasting positions among member states have led to complex negotiations and a lack of consensus on accommodating third-country measures like India’s PAT scheme, and without recognition, Indian exports, particularly in sectors like steel, aluminum, and cement, could face tariffs ranging from 20% to 35% under CBAM.
Apart from the CBAM issue, India faces another significant issue, and that is, whether the Data Protection Board of India is ready to co-regulate with the EU? The Digital Personal Data Protection Act (DPDPA), enacted in August 2023, lays the foundation for India’s data protection regime. However, as of April 2025, the act has not been fully enforced, and the Data Protection Board of India (DPBI), the central adjudicatory body envisioned under the Act, is yet to be operationalized. While the Indian government has taken certain proactive steps by allocating INR 2 crore in the 2024–2025 budget for establishing the DPBI , the Board’s formation is pending, and its functional capabilities remain untested. The Outcome Budget for 2025–26 sets a 75% completion target for setting up the DPBI’s digital office, including recruitment and platform development, alongside the notification of 25 rules under the Act. In the Union Budget for FY2025–26, the Ministry of Electronics and Information Technology (MeitY) increased the allocation for the DPBI to ₹5 crore, up from ₹2 crore in the previous fiscal year. While these steps need to be applauded, the delay in the completion of such tasks dilutes India’s ability to demonstrate an effective enforcement mechanism, which is a critical criterion for the EU when considering data protection adequacy decisions. These are all essential components of the EU’s General Data Protection Regulation (GDPR) framework. Until India establishes and empowers the DPBI with clear operational guidelines and enforcement capabilities, its readiness to engage in co-regulatory arrangements with the EU remains limited.
By cautiously taking the required steps, India can ensure that it not only enters the EU market but also stays in it for a very long time, expanding its economic reach and increasing its GDP with time. This geopolitical shift currently in process is a golden opportunity for India because the world is looking for a stable, reliable, and strong partner other than the traditional powers, and India has the potential to fill that void. If India plays the cards right, the next decade and the next century will not be India adjusting to a changing world but the world adjusting to India’s rise.
As India takes confident strides into this evolving global order, it is set to carve a path that other countries, especially the Global South (Brazil, Indonesia, or South Africa), may soon follow. India today has a unique strategic autonomy that allows it to deal with both power blocs, navigate multipolar alignments, and maintain its non-alignment stance. India offers a rare example of balance in an increasingly polarised and fragmented world. India’s choices today are not a result of alignment with any single bloc of power; its choices today are strategically calculated decisions taken in the national interest of the country. These same choices of navigating partnerships, protecting sovereignty, and expanding influence lie ahead for other emerging powers at this moment in time. This is an important phase that can decide where the world heads in the future, and the Global South must not just adapt to the changes but also prepare to lead. In this evolving global order, one is left to ask whether India’s rise is an exception shaped by circumstance, or is it quietly becoming the model that others will begin to emulate?
