uk and india forge trade alliance amid global tariff turbulence
London, Tuesday, 6 May 2025.
The UK and India have finalized a trade agreement poised to reshape economic dynamics amidst Washington’s evolving tariff landscape. Anticipate phased tariff eliminations on the majority of goods within a decade. The agreement aims to boost the British economy by £4.8 billion annually. The deal offers new prospects and hurdles for semiconductor firms operating in the involved regions. Tariffs on whisky and gin will be halved from 150% to 75%, then reduced to 40% within a decade. Automotive tariffs will be cut from over 100% to 10%.
trade agreement details
The UK-India trade agreement, set on Tuesday, May 6, 2025, is projected to boost bilateral trade by £25.5 billion [2]. The agreement will see India gradually lower import taxes, leading to the vast majority of goods traded becoming fully tariff-free within a decade [2]. The UK government estimates the deal will add an annual £4.8 billion to the British economy over the long-term, equivalent to 0.17% of gross domestic product [1]. This agreement marks India’s most ambitious and modern trade deal to date, cutting tariffs on products including whisky, gin, cosmetics, and vehicles [1].
expert opinions and market resilience
Keshav R. Murugesh, chief executive of NYSE-listed WNS, noted the timing of the FTA is ideal for enhancing the economic resilience of both the UK and India [2]. Murugesh believes the agreement will provide access to new markets and reduce vulnerability to external shocks [2]. This perspective suggests a positive outlook for companies like WNS, which may see increased business activity due to strengthened trade relations. UK Prime Minister Keir Starmer stated the deal will grow the economy and deliver for British people and business [2].
impact on specific sectors
The trade deal includes specific tariff reductions that will impact various sectors [2]. Tariffs on UK whisky and gin will be halved from 150% to 75% and then reduced to 40% within a decade [2]. Automotive tariffs will be cut from over 100% to 10% [2]. These changes are expected to create new opportunities for businesses in these sectors, potentially leading to increased sales and market share. For investors, this signals potential growth in these industries, warranting a closer look at companies involved in the production and export of these goods.
broader economic context
The agreement comes amid a backdrop of trade tensions spurred by U.S. tariff policies, which are reshaping global trade [1]. Major economies are seeking new trade alliances to mitigate the impact of these tensions [4]. Trade between the UK and India stood at £42.6 billion in 2024, up 8.3% from the previous year [2]. However, the UK had a £8.4 billion trade deficit with India at the end of 2024 [2]. The new trade deal aims to address this imbalance and foster more equitable trade relations between the two nations [2].
challenges and concerns
Despite the potential benefits, challenges remain, particularly concerning competition from other nations [3]. There are rising concerns about potential dumping of goods, especially from China, which could undermine domestic manufacturing [3]. India’s trade deficit with China has expanded to $100 billion, and in March, India’s import total rose by 25%, driven by electronics, batteries, and solar panels [3]. These factors highlight the need for Indian industries to enhance their competitiveness to fully capitalize on the opportunities presented by the UK trade deal [3].