India-UK FTA: 85% of Indian Steel Exports Shielded from UK Safeguards

The long-standing deadlock regarding steel trade under the India-UK Free Trade Agreement has finally been resolved, providing significant relief to Indian exporters. As both nations prepare to operationalise the Comprehensive Economic and Trade Agreement (CETA), a landmark consensus has ensured that the vast majority of India's steel shipments remain protected from upcoming British trade curbs.

Resolving the Steel Safeguard Deadlock

The UK’s proposed steel safeguard regime was one of the most contentious hurdles in finalizing the trade pact signed on July 24, 2025. The new British framework, set to take effect on July 1, 2026, involves a tightening of import limits, with overall quota volumes being slashed by 60% compared to existing mechanisms. Under these rules, any steel imports exceeding the specified quota will face a steep 50% tariff.

However, through strategic negotiations—including discussions between Commerce and Industry Minister Piyush Goyal and UK Secretary of State Peter Kyle—India has successfully secured protections for 85% of its outbound steel shipments. This protection is achieved through a sophisticated mix of Country-Specific Quotas (CSQ), residual quotas, and access under the Authorised Use Scheme (AUS), ensuring that Indian manufacturers can maintain market access despite the stricter UK regime.

Economic Impact and Trade Volumes

The importance of this breakthrough cannot be overstated given the scale of bilateral trade. In the 2025-26 period, India’s exports of iron, steel, and related products to the UK reached a substantial USD 893.4 million. By shielding 85% of these exports from the new restrictive measures, the CETA aims to minimise market disruptions and provide a predictable environment for Indian industrial exporters.

The agreement is designed to balance the UK's need to protect its domestic manufacturing capabilities—specifically for steel products that can be produced within Britain—with India's need to maintain its export momentum in the global metals market.

The Next Challenge: The Carbon Tax Hurdle

While the steel quota issue has been addressed, a new regulatory challenge looms on the horizon: the UK’s Import Carbon Pricing Mechanism, similar to the EU's Carbon Border Adjustment Mechanism (CBAM). Scheduled to come into force in 2027, this carbon tax could significantly impact Indian heavy industries.

According to the Global Trade Research Initiative (GTRI), Indian exports worth approximately USD 775 million—spanning iron, steel, aluminium, fertiliser, and cement—could be vulnerable to this mechanism. Once free allowances under the UK's Emissions Trading Scheme (ETS) are phased out, the carbon tax is expected to range between 14% and 24% of the import value. Addressing these environmental trade barriers will be the next critical chapter in the evolving India-UK economic relationship.

Key Takeaways