India-UK FTA: Steel Export Hurdle Cleared as 85% of Shipments Secured

The long-standing impasse regarding steel trade in the India-UK Free Trade Agreement (FTA) has finally been resolved, providing much-needed certainty for Indian exporters. Through a strategic consensus, India has ensured that the vast majority of its steel shipments remain shielded from the UK's upcoming restrictive safeguard measures.

Breaking the Deadlock on Steel Safeguards

The UK's proposed steel safeguard regime was one of the most significant obstacles in operationalizing the Comprehensive Economic and Trade Agreement (CETA), which is set to go live on July 15. Following high-level discussions between India's Commerce and Industry Minister Piyush Goyal and UK Secretary of State for Business and Trade Peter Kyle, both nations have reached a landmark consensus.

The agreement ensures that 85% of India's steel exports to the UK will remain outside the impact of the new British measures. To protect Indian commercial interests, a sophisticated mechanism involving Country-Specific Quotas (CSQ), residual quotas, and access under the Authorised Use Scheme (AUS) has been implemented. This arrangement aims to minimize market disruptions and maintain a balanced trading environment for both nations.

Understanding the New British Tariff Regime

The resolution comes at a critical time, as the UK is set to tighten its import rules starting July 1, 2026. Under the revised framework, the UK will cap tariff-free steel imports, reducing overall quota volumes by 60% compared to the previous safeguard mechanism.

Any steel imports that exceed these established quotas will be hit with a significant 50% tariff. These measures are specifically targeted at steel products that can be manufactured domestically within the UK. For Indian exporters, whose iron and steel exports to the UK reached USD 893.4 million in 2025-26, this quota-based protection is vital for maintaining market share.

The Looming Challenge of Carbon Taxes (CBAM)

While the steel safeguard hurdle has been cleared, a new regulatory challenge is on the horizon: Britain's Import Carbon Pricing Mechanism. Scheduled to take effect in 2027, this framework mirrors the European Union's Carbon Border Adjustment Mechanism (CBAM).

According to the Global Trade Research Initiative (GTRI), India faces a significant financial risk here, with approximately USD 775 million worth of exports—including iron, steel, aluminium, fertiliser, and cement—potentially being affected. Once the free allowances under the UK's Emissions Trading Scheme (ETS) are phased out, the carbon tax could range between 14% and 24% of the import value. This remains a critical area of negotiation for Indian policymakers to ensure the long-term competitiveness of Indian heavy industries in the British market.

Key Takeaways