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

India and the United Kingdom have reached a landmark consensus regarding steel trade, effectively resolving one of the most significant hurdles in their Comprehensive Economic and Trade Agreement (CETA). This breakthrough ensures that the vast majority of Indian steel shipments will remain unaffected by Britain's upcoming restrictive trade measures.

Resolving the Steel Safeguard Deadlock

The negotiations over the UK's proposed steel safeguard regime were a major sticking point in the implementation of the trade pact signed on July 24, 2025. However, recent discussions between India's Commerce and Industry Minister Piyush Goyal and UK Secretary of State for Business and Trade Peter Kyle have paved the way for a balanced trading environment.

Under the newly negotiated terms, 85% of India's steel exports will remain outside the scope of Britain's upcoming safeguard measures. To protect Indian commercial interests, the agreement utilizes a strategic combination of Country-Specific Quotas (CSQ), residual quotas, and access under the Authorised Use Scheme (AUS). This framework aims to minimize market disruptions while maintaining steady trade flows between the two nations.

Understanding the New British Tariff Regime

The resolution comes at a critical time, as the UK prepares to implement a much tighter safeguard regime starting July 1, 2026. The new British framework is designed to protect domestic industries by capping tariff-free steel imports. Specifically, the overall quota volumes will be slashed by 60% compared to the existing safeguard mechanism.

Under these rules, any steel imports that exceed the established quota will be hit with a substantial 50% tariff. These measures are specifically targeted at steel products that are capable of being manufactured within the United Kingdom. By securing these exemptions, India has proactively mitigated the impact on its significant export volume, which stood at USD 893.4 million in the 2025-26 period.

The Looming Challenge of Carbon Taxes

While the steel quota issue has been largely settled, Indian exporters face a new frontier of regulatory challenges: the UK's Import Carbon Pricing Mechanism. Scheduled to come into force in 2027, this mechanism mirrors the European Union's Carbon Border Adjustment Mechanism (CBAM).

The UK will become the second major economy to implement such a carbon tax, targeting carbon-intensive sectors including iron, steel, aluminium, fertiliser, cement, hydrogen, ceramics, and glass. Economic think tank GTRI warns that Indian exports worth approximately USD 775 million could be impacted by this tax. Once free allowances under the Emissions Trading Scheme (ETS) are fully phased out, the tax could range between 14% and 24% of the total import value, posing a significant cost challenge for Indian manufacturers.

Key Takeaways