UK-India Free Trade Deal is a Strategic Counter to Trump's Tariffs

The deal—the UK’s most significant post-Brexit trade pact—supports India’s economic ascent, writes Ashraf Nehal.

By prioritising green technology and infrastructure, the FTA aligns with India’s $2 trillion export goal by 2030 and the UK’s post-Brexit diversification.

(Photo: Kamran Akhter/The Quint)

(After nearly three years of negotiations, India and the United Kingdom will sign a landmark Free Trade Agreement on Thursday, 23 July, during Prime Minister Narendra Modi's visit to the UK.)

The UK-India Free Trade Agreement (FTA), signed on 6 May 2025, projects a £25.5 billion bilateral trade boost by 2040, a figure grounded in robust economic modelling. Along with the FTA, the two countries announced the Double Contribution Convention, preventing double social security contributions for temporary workers for up to three years.

Initiated in January 2022 under Conservative Prime Minister Boris Johnson, the FTA aimed to anchor the “Global Britain” strategy, targeting India’s £2.5 trillion economy.

Negotiations faltered over India’s demand for labour mobility and UK tariff cuts on whiskey (150 percent) and cars (up to 125 percent), with political shifts—the UK and Indian elections in 2024—exacerbating delays.

Conservative resistance to visa concessions, amplified by domestic immigration concerns, and India’s pushback against the UK’s Carbon Border Adjustment Mechanism (CBAM), due in 2027, left 90 percent of the FTA's 26 chapters agreed but unresolved by spring 2024.

The Labour government, elected in July 2024, transformed the negotiation landscape. Foreign Secretary David Lammy’s Delhi visit framed the FTA as a cornerstone of Labour’s growth agenda. Labour’s strategic pivot—offering limited visa concessions for Indian IT and healthcare professionals without altering the points-based immigration system—addressed UK skills shortages while defusing political backlash. India’s “rebalancing mechanism” for CBAM-related export losses ensured equity, a critical concession that Conservative negotiators struggled to secure.

By April 2025, Chancellor Rachel Reeves and Finance Minister Nirmala Sitharaman finalised the deal. This breakthrough highlights Labour’s ability to navigate complex trade-offs, positioning the UK as a nimble player in global trade while deepening ties with a rising economic power.

A Shield Against US Tariffs

The FTA’s economic significance is magnified by US tariffs imposed in 2025 under US President Donald Trump, applying 10-20 percent duties on £5 billion of UK exports (whiskey, cars) and $30 billion of Indian exports (pharmaceuticals, textiles).

These tariffs, confirmed by trade analysts, underscore the FTA’s role as a bulwark against protectionism. This deal’s resilience lies in its counter-cyclical design. While US protectionism contracts global trade, the FTA’s 25 percent projected trade increase by 2040 offers a lifeline, countering Brexit-related EU trade losses (down 15 percent post-2020) and boosting the UK's GDP by £3.3 billion by 2035.

• By slashing India’s tariffs—whiskey from 150 percent to 75 percent initially (40 percent by year ten) and cars from over 100 percent to 10 percent under quotas—the FTA unlocks India’s 1.4 billion-strong market for UK firms and the UK’s £1.2 trillion economy for Indian exporters.

• Textiles, previously facing 10 percent UK tariffs, gain a competitive edge, potentially capturing market share lost to competitors like Bangladesh.

• Services, comprising 80 percent of the UK's GDP and 42 percent of India’s, benefit from liberalised IT, finance, and legal frameworks, enabling firms like Infosys and Deloitte to deepen cross-border operations.

• Small and medium enterprises (SMEs), representing 60 percent of UK jobs and 30 percent of India’s GDP, gain from simplified customs and digital trade provisions, though navigating India’s 70 percent non-harmonised standards remains a challenge.

• By prioritising green technology and infrastructure, the FTA aligns with India’s $2 trillion export goal by 2030 and the UK’s post-Brexit diversification.

• The Double Contribution Convention catalyses FDI, building on £20 billion in UK investment in India and £8 billion from Indian firms like Tata in the UK.

Compliance, Arbitration, and Complexity

The FTA’s legal framework is a linchpin for its transformative potential. Cross-border compliance, aligned with India’s 2023 Digital Personal Data Protection Act and environmental, social, and governance (ESG) standards, demands sophisticated counsel, with regulatory cooperation provisions ensuring clarity.

The UK’s CBAM, a sticking point, is mitigated by India’s rebalancing mechanism, preserving export competitiveness for steel and other sectors. Mergers, acquisitions, and joint ventures will proliferate, with legal teams navigating India’s Foreign Exchange Management Act and the UK’s National Security and Investment Act.

The arbitration-focused dispute resolution mechanism, leveraging hubs like London and Singapore, anticipates a surge in commercial disputes, a structure validated by trade experts. The Double Contribution Convention streamlines tax liabilities, but optimising its benefits requires intricate structuring, elevating the role of legal strategists.

Strategically, the FTA positions the UK and India as counterweights to US tariff-driven isolationism and geopolitical fault lines, such as India’s neutral Russia stance versus the UK’s AUKUS alignment. Labour’s inclusive approach—bolstering SMEs, high-skill sectors, and job creation—distinguishes it from Conservative hesitancy, aligning with India’s global integration ambitions and UK economic resilience.

The deal, the UK’s most significant post-Brexit trade pact, mitigates EU trade losses and supports India’s economic ascent. Yet, implementation risks—India’s regulatory complexities, 2029 elections, and geopolitical tensions—demand sustained commitment. Labour’s foresight in fostering stakeholder consensus and regulatory clarity positions the FTA as a model for multipolar trade partnerships.

The corridor from London to Delhi, Birmingham to Bengaluru, Glasgow to Chennai invites innovators, professionals, and communities to shape a collaborative future, harnessing the FTA’s potential to redefine global trade dynamics.

(Ashraf Nehal is a political and foreign policy analyst and a columnist who mainly tracks South Asia. He can be reached on Twitter at @ashrafnehal19 and on Instagram at ___ashraf___19. This is an opinion piece. The views expressed above are the author’s own. The Quint neither endorses nor is responsible for them.)