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

In a major diplomatic and economic breakthrough, India has successfully navigated the complexities of the UK's proposed steel safeguard measures within the India-UK Comprehensive Economic and Trade Agreement (CETA). This landmark consensus ensures that the vast majority of India's steel shipments will remain protected from restrictive British trade curbs.

Breaking the Deadlock on Steel Trade

The UK's steel safeguard regime was previously identified as one of the most significant hurdles in the implementation of the trade pact signed on July 24, 2025. However, following high-level discussions—including meetings between Commerce and Industry Minister Piyush Goyal and UK Secretary of State Peter Kyle—both nations have reached a consensus to promote bilateral steel trade.

The new arrangement ensures that 85% of India’s steel exports to the UK fall outside the scope of the restrictive measures. To protect Indian commercial interests, the agreement utilizes a strategic mix of Country-Specific Quotas (CSQ), residual quotas, and access under the Authorised Use Scheme (AUS). This framework is designed to minimize market disruptions and maintain a balanced trading environment for Indian exporters.

Understanding the New UK Safeguard Regime

The resolution comes at a critical time, as the UK is set to implement a much tighter steel regime starting July 1, 2026. Under these new rules, tariff-free steel imports will be capped, with overall quota volumes being slashed by 60% compared to the previous safeguard mechanism.

Any imports exceeding these established quotas will face a steep 50% tariff. These measures are specifically targeted at steel products that can be manufactured domestically within the United Kingdom. By securing these exemptions and quotas, India has effectively insulated its exporters from the most aggressive aspects of Britain's protectionist shift.

The Looming Challenge of Carbon Taxes

While the steel quota issue has been resolved, a new economic challenge is on the horizon: the UK’s Import Carbon Pricing Mechanism, similar to the European Union's Carbon Border Adjustment Mechanism (CBAM). Scheduled to come into force in 2027, this framework aims to tax carbon-intensive imports.

The implications for India are substantial. According to the Global Trade Research Initiative (GTRI), Indian exports worth approximately USD 775 million could be impacted by this carbon tax. The tax, which will target sectors including iron, steel, aluminium, fertiliser, cement, and hydrogen, could range between 14% and 24% of the import value once free allowances under the Emissions Trading Scheme (ETS) are phased out. Given that India's exports of iron, steel, and related products to the UK reached USD 893.4 million in 2025-26, managing these carbon costs will be the next major frontier in India-UK trade relations.

Key Takeaways