Commerce Minister Piyush Goyal with Jonathan Reynolds, UK Minister for Business and Trade

India and the UK are currently grappling with two major sticking points—the UK’s new steel safeguard measures and its planned Carbon Border Adjustment Mechanism (CBAM)—which are delaying the rollout of their Comprehensive Economic and Trade Agreement (CETA).

These measures could significantly impact Indian exports, prompting New Delhi to consider rebalancing tariff concessions on British goods such as Scotch whisky.

The Comprehensive Economic and Trade Agreement between India and the UK was signed in July 2025, marking a milestone in bilateral economic relations. However, its implementation has been slowed by fresh trade barriers introduced by Britain.

On 2 June 2026, Commerce Secretary Rajesh Agarwal met UK Permanent Secretary Amanda Brooks in New Delhi to address these concerns. Agarwal noted that both sides took stock of progress and worked through the sticking points, reaffirming their commitment to regular engagement to ensure effective implementation.

The most pressing issue is Britain’s steel safeguard measure, which will take effect from 1 July 2026. Under this policy, the UK will reduce tariff-free steel import quotas by 60 per cent compared to earlier levels.

Any imports beyond the quota will face a steep 50 per cent tariff. This measure is aimed at protecting Britain’s domestic steel industry but poses a serious challenge for Indian exporters, who have been major suppliers of steel products to the UK. The safeguard applies to steel products that can also be manufactured within Britain, thereby restricting India’s competitive advantage.

The second sticking point is the UK’s decision to implement its Carbon Border Adjustment Mechanism from 2027. This mechanism will impose a carbon tax on imports of emission-intensive products such as steel, aluminium, fertiliser, hydrogen, ceramics, glass, and cement.

Economic analysts estimate that India’s exports worth nearly USD 775 million to the UK could be affected. The tax could range between 14 and 24 per cent of the import value once free allowances under the UK’s Emission Trading System are phased out.

India has already raised concerns about similar measures in the European Union, where CBAM costs have eroded the commercial value of free trade agreements. The UK’s adoption of CBAM is seen as a second major blow to Indian exporters.

In response, Indian negotiators have indicated that tariff concessions offered to Britain under the CETA may be revisited. For example, India had agreed to reduce tariffs on Scotch whisky from 150 per cent to 75 per cent immediately, with a further reduction to 40 per cent over a decade.

If Britain does not roll back its steel safeguard measures, India may reconsider these concessions. Officials have stressed that while 99 per cent of Indian exports are set to receive duty-free access to the UK market under the pact, reciprocity is essential for the agreement to remain balanced.

Alongside these technical negotiations, Commerce and Industry Minister Piyush Goyal held talks with UK Secretary of State for Business and Trade Peter Kyle on the same day. Both leaders discussed ways to strengthen economic ties and advance shared business priorities.

Goyal emphasised that the next phase of India-UK economic engagement must be robust and forward-looking, aligning with India’s broader vision of becoming a developed economy under the Viksit Bharat framework.

The India-UK trade pact was originally expected to be implemented by April 2026, with the goal of doubling bilateral trade to USD 120 billion by 2030.

However, the steel safeguard and CBAM issues have emerged as significant obstacles. Unless these matters are resolved, the operationalisation of the agreement will remain uncertain, and India may be compelled to adopt retaliatory measures to protect its exporters.

PTI