The U.K. and India have concluded a free trade agreement after three years of intermittent negotiations, with the aim of boosting bilateral trade by $34 billion by 2040.
What Happened: The deal between the world’s fifth and sixth largest economies comes in the wake of tariff chaos sparked by U.S. President Donald Trump. The agreement is anticipated to reduce tariffs on goods such as whisky and create opportunities for British companies in India and Indian workers in the U.K, reported Reuters.
Indian Prime Minister Narendra Modi characterized the deal as “ambitious and mutually beneficial,” while British Prime Minister Sir Keir Starmer praised it as a “new era for trade.”
This deal marks India’s step towards liberalizing its traditionally protected markets, including the automotive sector, and sets a benchmark for its future interactions with major Western powers. For the U.K., this is the most substantial trade agreement since its exit from the European Union in 2020.
India’s trade ministry announced that under the agreement, 99% of Indian exports—including textiles—will be exempt from duties. In contrast, the U.K. will see tariff reductions on 90% of its tariff lines.
The deal is expected to boost the UK's annual economic output by £4.8 billion ($6.41 billion) by 2040—a modest yet significant gain relative to the country's £2.6 trillion ($3.47 trillion) GDP in 2024.
Why It Matters: Interestingly, the landmark deal between the U.K. and India comes at a time when a concrete deal between the U.S. and India is highly awaited.
A few weeks back, U.S. Vice President JD Vance visited India, wherein he finalized terms for a trade negotiation, aiming to double bilateral trade between the U.S. and India to $500 billion by the end of the decade. Meanwhile, U.S. Treasury Secretary Scott Bessent has reiterated several times that India could be the first country to sign a trade deal with the U.S.
Notably, President Trump told reporters on Tuesday that India has offered to drop all tariffs on American imports. “They’ve already agreed. They would have never done that for anybody else but me,” asserted Trump.
India, however, has not issued any official statements on the matter, as trade negotiations with the U.S. are still ongoing.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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