UK-India free trade agreement reduces tariffs, to boost commodity trade flows

The UK and India have concluded a major bilateral free trade agreement aimed at strengthening trade and economic ties between the two countries, which will reduce 90% of tariffs on UK exports, the countries announced May 6.

The agreement was announced in separate statements released by the Indian and UK governments following a phone call between Indian Prime Minister Narendra Modi and British Prime Minister Keir Starmer.

The agreement will reduce Indian tariffs on products such as whisky, cosmetics and medical devices, locking in reductions on 90% of tariff lines for UK exports, the UK government said.

"Whisky and gin tariffs will be halved from 150% to 75% before reducing to 40% by year ten of the deal, while automotive tariffs will go from over 100% to 10% under a quota," the UK government's statement said.

Other UK exports set to benefit from reduced tariffs include cosmetics, aerospace, lamb, medical devices, salmon and electrical machinery, the statement said.

The Indian government said the agreement will unlock new potential for the two nations to jointly develop products and services for global markets.

"This agreement cements the strong foundations of the India-UK Comprehensive Strategic Partnership and paves the way for a new era of collaboration and prosperity," it said.

Describing the agreement as "ambitious and mutually beneficial," Modi said the deal would deepen the comprehensive strategic partnership between the two nations and spur growth across multiple sectors.

The UK government described the agreement as a "huge economic win for the UK."

"Today we have agreed a landmark deal with India -- one of the fastest growing economies in the world, which will grow the economy and deliver for British people and business," Starmer said.

Trade flows rise in recent years

Trade flows between India and the UK -- including commodities such as aluminum, steel and refined oil -- have been growing steadily in recent years.

Total trade in goods and services between the UK and India totaled GBP 42.6 billion in 2024, increasing 8.3% year on year, according to the UK Office of National Statistics.

The UK's most valuable exports to India in 2024 were non-ferrous metals, totaling GBP 2 billion; metals ores and scrap, totaling GBP 866.3 million; mechanical power generators, totaling GBP 471.6 million; and beverages and tobacco, totaling GBP 263.7 million.

The most valuable goods imported to the UK from India included refined oil, totaling GBP 1.3 billion; clothing, totaling GBP 877.3 million; telecoms and sound equipment, totaling GBP 682.1 million; medicinal & pharmaceutical products, totaling GBP 667.4 million; and iron and steel, totaling GBP 489.2 million.

Lowering trade barriers with India, a large-scale producer of steel and aluminum, may add further bearish pressure to UK markets due to potential inflows of of discounted metal.

In an email to S&P Global Commodity Insights, Nadine Bloxsome CEO of the UK aluminium federation (ALFED), said that her team is awaiting further details surrounding the UK-India agreement and its potential implications for the UK aluminum industry.

She added that the UK's proposed Carbon Border Adjustment Mechanism (CBAM) represents one key area of concern, noting that India has previously expressed concerns that the mechanism could adversely affect its aluminum exports to the UK.

"Given these developments, ALFED is actively seeking feedback from its members to understand the potential implications of the FTA on the sector," she said.

"We are particularly interested in insights related to tariff changes, regulatory standards, and the impact of environmental policies like CBAM, she added.

Platts, part of S&P Global Commodity Insights, assessed UK hot-rolled coil at GBP535/mt DDP West Midlands on May 1, stable week over week.