India-UK FTA: Major Breakthrough as 85% of Steel Exports Escape British Curbs

The long-standing deadlock over steel trade protections in the India-UK Free Trade Agreement (FTA) has finally been resolved, marking a significant milestone for bilateral commerce. With 85% of Indian steel exports shielded from upcoming British safeguard measures, both nations are now poised to operationalize their Comprehensive Economic and Trade Agreement (CETA) starting July 15.

Resolving the Steel Safeguard Deadlock

The UK's proposed steel safeguard regime was previously one of the most contentious hurdles in finalizing the trade pact signed on July 24, 2025. Under the new British regime, which is set to take effect on July 1, 2026, tariff-free steel imports will be capped, and overall quota volumes will be slashed by 60% compared to the existing mechanism. Imports exceeding these quotas would face a steep 50% tariff.

However, through high-level diplomatic efforts—including discussions between Commerce and Industry Minister Piyush Goyal and UK Secretary of State for Business and Trade Peter Kyle—a consensus was reached to protect Indian interests. India has secured protection through a strategic combination of Country-Specific Quotas (CSQ), residual quotas, and access under the Authorised Use Scheme (AUS).

Protecting a Multi-Million Dollar Export Sector

The resolution comes at a critical time for Indian industry. In the 2025-26 fiscal year, India's exports of iron, steel, and related products to the UK reached a substantial USD 893.4 million. By ensuring that 85% of these outbound shipments remain outside the restrictive British measures, the CETA aims to minimize market disruptions and maintain a balanced trading environment for Indian exporters.

The agreement is designed to protect commercial interests while acknowledging the UK's need to safeguard its domestic manufacturing capabilities for steel products that can be produced within its own borders.

The Looming Challenge of Carbon Taxes

While the steel safeguard issue has been largely settled, a new hurdle looms 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 carbon tax could significantly impact several key Indian sectors.

According to the Global Trade Research Initiative (GTRI), Indian exports worth approximately USD 775 million could be affected by this mechanism. The tax, which will initially cover iron, steel, aluminium, fertiliser, hydrogen, ceramics, glass, and cement, could range between 14% and 24% of the import value. As the UK phases out free allowances under its Emissions Trading Scheme (ETS), Indian exporters will need to brace for increased costs and a push toward greener manufacturing processes to remain competitive.

Key Takeaways