India and the UK are actively working to resolve challenges in implementing the Comprehensive Economic and Trade Agreement (CETA), signed in July 2025. The discussions, held on June 2, 2026, between Commerce Secretary Rajesh Agarwal and UK Permanent Secretary Amanda Brooks, focused on overcoming obstacles such as the UK's steel safeguard measures and the upcoming carbon border adjustment mechanism (CBAM).
Key Trade Issues
The UK's decision to limit tariff-free steel imports from July 1, 2026, is a significant concern. The new measure will reduce quota volumes by 60% compared to the existing framework, with a 50% tariff on imports exceeding the quota. This policy affects steel products that can be manufactured domestically in the UK.
- Steel Safeguard: Limits on tariff-free imports, 60% quota reduction.
- Carbon Border Adjustment Mechanism (CBAM): To be implemented in 2027, impacting sectors like iron, steel, and aluminium.
"Engaged in extensive discussions with UK Permanent Secretary Ms. Amanda Brooks on #IndiaUKCETA implementation," said Rajesh Agarwal.
Economic Impact
According to the Global Trade Research Initiative (GTRI), India's exports worth USD 775 million could be affected by the UK's carbon tax on products such as iron and steel, aluminium, and cement. The CBAM, set to start in 2027, will initially cover sectors including iron, steel, aluminium, fertiliser, hydrogen, ceramics, glass, and cement.
| Product | Export Value (USD million) | Impacted by CBAM |
|---|---|---|
| Iron & Steel | 893.4 | Yes |
| Aluminium | - | Yes |
| Cement | - | Yes |
Bilateral Engagement
Commerce and Industry Minister Piyush Goyal and UK Secretary of State for Business and Trade Peter Kyle also discussed strengthening bilateral economic ties. The focus was on advancing shared business priorities and enhancing the economic partnership.
Future Outlook
The UK's CBAM will follow the European Union's model, becoming the second major economy to implement such a mechanism. The carbon tax could range between 14% and 24% of the import value, impacting India's export competitiveness.
India's total merchandise exports to the UK amounted to USD 13.4 billion in 2025-26, with iron and steel exports forming a significant portion.
The ongoing discussions and policy adjustments aim to mitigate these challenges and foster a robust economic relationship between India and the UK.
