As the European Union negotiates a trade deal with India amid global struggle with ever-shifting U.S. trade tariffs, the continent’s auto industry trade group urged the bloc’s leaders to resist closing a deal while leaving important outcomes on the table. 

There’s much at stake, with nearly 1.5 billion people calling India home, but particularly due to dramatic room for growth, said the European Automobile Manufacturers’ Association, or ACEA. The group pegged annual passenger car sales in India at just four million units.

India, which in 2023 surpassed China to become the world’s most populous country – with a burgeoning economy to go with the growth – is also the EU’s biggest trading partner. The bloc’s leaders are scheduled to visit India next week. 

“A truly ambitious deal would lift significant barriers to trade in both directions and provide a win for both parties at a very challenging moment,” ACEA said in a statement, undoubtedly referring to erratic trade winds that have buffeted the world since Donald Trump took office last year. 

Last week Trump threatened to impose tariffs on European countries that opposed his aim to take control of Greenland, duties that presumably would have been added to 15% tariffs the administration imposed on the union last year. He quickly backed off after meeting with NATO’s secretary general.

Meanwhile, the U.S. is still India’s largest exports market despite Trump’s imposition of 50% tariffs on the country last year, so a deal with the European Union is obviously attractive to it.

Still, ACEA advised care in EU talks with India, not only about exports but also EU manufacturing on the subcontinent and tariffs on auto parts for factories in both India and Europe.

“With the current state of negotiations, there is a real risk that the agreement will be restricted by quotas, market segmentation rules, residual tariffs, licensing systems, and various other mechanisms that will make the benefits of any deal hard to access," the group said. "The parties need to cut the restrictions and be ambitious in granting meaningful quotas – particularly with long-term market size in mind – and in completely removing tariffs.

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