Britain and India concluded a trade agreement on 6 May 2025 that the UK government called “the biggest and most economically significant bilateral trade deal the UK has done since leaving the EU”. The deal cuts tariffs in both directions and opens parts of the Indian market to British exports.
It landed days after President Donald Trump said a first United States agreement with India was close, and it left Washington without the deal it had signalled. His so-called reciprocal tariffs were on track to start on 8 July at rates as high as 50 per cent, CNN reported.
The deal covers goods rather than services and includes new visa routes, according to The Guardian and CNN.
The Deal and the Numbers
The agreement was concluded and announced on 6 May 2025, and the UK government’s own estimate is that it will raise bilateral trade by £25.5 billion a year in the long run, add £4.8 billion a year to the UK economy and lift wages by £2.2 billion a year in the long run. CNN reported the increase as 60 per cent and converted the £25.5 billion figure to $34.1 billion.
Those are projections rather than results, and they describe the effect the government expects once the agreement is fully in force rather than a gain already recorded. Bilateral trade covers the flow of goods and services between two countries in both directions, and trade between the UK and India was worth about £40 billion a year at the time, according to The Guardian.
What Each Side Gets
India cuts tariffs on 90 per cent of British goods lines, the individual product categories in its tariff schedule, according to The Guardian and CNN. Duties on whisky and gin fall from 150 per cent to 75 per cent on entry and reach 40 per cent by the tenth year, a staged reduction that runs across the life of the schedule. Tariffs on cars, which stand above 100 per cent, fall to 10 per cent within a quota, meaning a set volume of British vehicles can enter at the lower rate. New access opens for aerospace, salmon, lamb, medical devices, electrical machinery, soft drinks, chocolate and biscuits.
In the other direction, the UK cuts tariffs on Indian clothing, footwear and food, including frozen prawns, according to The Guardian and CNN. A tariff is a tax on imports collected at the border, so each cut lowers the cost of the goods in the destination market.
Movement of People, and What Is Missing
The deal includes about 1,800 visas a year for chefs, musicians and yogis, and Indian staff posted to the UK will be exempt from national insurance contributions for three years, according to The Guardian. National insurance is the payroll contribution that employers and employees pay in the UK, so the exemption removes a cost for Indian firms posting staff to Britain.
Two areas are not covered. Legal and financial services fall outside the agreement, and the bilateral investment treaty that was under negotiation is not part of it, The Guardian reported. Neither sector is addressed by the agreement, which rests on goods and on the movement of a limited number of people.
The Contrast With Washington
No United States agreement has emerged. Trump had named India, Japan and South Korea as likely candidates for deals, and the reciprocal tariffs, the duties his administration planned to apply to trading partners, were to follow in July, CNN reported. UK trade with the United States is worth close to £315 billion a year, against about £40 billion with India, according to The Guardian.
Mujtaba Rahman of Eurasia Group said: “This is welcome news and a coded reminder to Donald Trump that not all UK eggs are in the US basket.” The UK has a concluded agreement with India; its talks with the United States remain open.
Reaction and What Comes Next
Keir Starmer said in the government’s announcement: “We are now in a new era for trade and the economy.” Emma Rowland, policy adviser for trade at the Institute of Directors, called it “a win for the UK, removing barriers and business costs for British firms trading with the fourth-largest global economy”, CNN reported. Narendra Modi called the agreement a “historic milestone”, according to The Guardian.
The estimates are long-run projections rather than results, the full detail had not been published when it was announced, and The Guardian reported that analysts saw the agreement as a tariff deal rather than a comprehensive one.
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Sources: GOV.UK, https://www.gov.uk/government/news/uk-signs-trade-deal-with-india; GOV.UK, https://www.gov.uk/government/news/uk-india-free-trade-deal-a-deal-for-growth; CNN, https://edition.cnn.com/2025/05/06/business/india-uk-trade-deal-tariffs-intl; The Guardian, https://www.theguardian.com/politics/2025/may/06/starmer-beats-trump-to-the-line-in-race-for-trade-deal-with-india
