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

India and the United Kingdom have reached a landmark consensus regarding steel trade, effectively resolving one of the most contentious hurdles in their Free Trade Agreement (FTA). This breakthrough ensures that the vast majority of Indian steel shipments will remain protected from the UK’s upcoming restrictive safeguard measures.

Resolving the Steel Safeguard Deadlock

The negotiations surrounding the UK's proposed steel safeguard regime were a significant sticking point in the implementation of the Comprehensive Economic and Trade Agreement (CETA), signed on July 24, 2025. However, recent discussions between India’s Commerce and Industry Minister Piyush Goyal and UK Secretary of State Peter Kyle have paved the way for the pact to be operationalized from July 15.

Under the new agreement, 85% of India's steel exports to the UK will be shielded from the British trade curbs. To protect Indian commercial interests, the deal utilizes a sophisticated mix of Country-Specific Quotas (CSQ), residual quotas, and access through the Authorised Use Scheme (AUS). This arrangement aims to minimize market disruptions and maintain a balanced trading environment for both nations.

Understanding the New UK Import Regime

The UK’s revised safeguard framework, set to take effect on July 1, 2026, introduces significantly tighter restrictions on steel imports that can be manufactured within Britain. The new regime will cap tariff-free steel imports, reducing overall quota volumes by a substantial 60% compared to existing safeguard mechanisms.

Any steel imports that exceed these newly defined quotas will be subject to a heavy 50% tariff. Despite these stringent limits, the successful negotiation of the CETA ensures that Indian exporters retain a significant foothold in the British market, preventing a total lockout of Indian steel products.

The Looming Shadow of Carbon Taxes

While the steel quota issue has seen a major resolution, Indian exporters face a secondary challenge: the UK's upcoming Import Carbon Pricing Mechanism (the British version of the EU's CBAM). Scheduled to come into force in 2027, this carbon border tax targets carbon-intensive sectors including iron, steel, aluminium, fertiliser, cement, and hydrogen.

According to the Global Trade Research Initiative (GTRI), Indian exports worth approximately USD 775 million could be impacted by this mechanism. Once the free allowances under the UK’s Emissions Trading Scheme (ETS) are fully phased out, the tax could range between 14% and 24% of the import value. Given that India’s iron and steel exports to the UK reached USD 893.4 million in 2025-26, managing carbon footprints will become a critical economic priority for Indian manufacturers.

Key Takeaways