Agreement Summary
The India–UK Free Trade Agreement (FTA), signed on May 6, 2025, is set to start taking effect within 12 months. It removes tariffs on 99% of Indian exports to the UK and significantly lowers duties on key British imports—such as Scotch whisky and automobiles—thereby unlocking extensive new trade corridors. This pact enables Indian logistics firms to expand their freight‑forwarding, warehousing, and customs‑clearance services across sectors like textiles, leather, and beverages.
Negotiation Timeline
Following over three years of on‑and‑off talks, the agreement was finalized on May 6, 2025. Ratification and the start of implementation are expected by year‑end.
Tariff Structure
India → UK
Reductions on Indian Exports
| Commodity | Current Tariff (UK MFN) | FTA Tariff |
| Textiles & Apparel | 6.5–12% | 0% |
| Leather & Footwear | 6.5–12% | 0% |
| Gems & Jewelry | 5–8.5% | 0% |
UK → India
Reductions on British Exports
| Commodity | Current Tariff (India MFN/Bound) | FTA Tariff (Year 10) |
| Scotch Whisky | 150% | 40% |
| Gin | 150% | 40% |
| Automobiles | >100% (peak 100%) | 10% |
Note: Tariffs are set to be reduced in a phased manner over a period of 10 years. For instance, whisky tariffs will initially reduce to 75% and gradually fall to 40%.
US–China Trade‑War Domino Effect
In parallel to the India–UK trade dynamics, US–China trade war domino effect is reshaping regional trade routes and supply chains. According to the Global Trade Research Initiative (GTRI), China’s exports to the U.S. dropped sharply by 34.5% year-on-year in May 2025, from $44.0 billion to $28.8 billion. However, this contraction has been partially offset by increased Chinese exports to the EU (+12%), ASEAN (+15%), and India (+12.4%).
India’s own trade data corroborates these shifts. Overall merchandise imports fell slightly by 1.8%, primarily due to reduced oil and gold imports. However, when excluding petroleum, gold, and diamonds, imports actually rose by 12%, reaching $41.2 billion in May 2025. Notably, electronics and machinery imports surged—electronics by 27.5% to $9.1 billion and machinery and computers by 22% to $5 billion—driven largely by imports from China and Hong Kong, which collectively rose by 22.4%.
Meanwhile, India’s exports to the US rose 17.3% to $8.8 billion, primarily due to iPhone shipments via Chennai avoiding higher tariffs. Although total merchandise exports edged down from $39.59 billion in May 2024 to $38.73 billion in May 2025, a 54.1% jump in electronic goods exports (to $4.57 billion) helped mitigate the fall.
Source:
Business Standard
Fortune India
