Britain, India sign landmark free trade pact during Modi visit
The two countries concluded talks on the trade pact in May after three years of stop-start negotiations, with both sides hastening efforts to clinch a deal in the shadow of tariff turmoil unleashed by U.S. President Donald Trump.
The agreement between the world's fifth and sixth largest economies aims to increase bilateral trade by a further 25.5 billion pounds ($34 billion) by 2040.
It is Britain's biggest trade deal since it left the European Union in 2020, although its impact will be a fraction of the effect of leaving the orbit of its closest trading partner.
For India, it represents its biggest strategic partnership with an advanced economy, and one which could provide a template for a long mooted deal with the EU as well as talks with other regions.
It will take effect after a ratification process, likely within a year.
British Prime Minister Keir Starmer said the deal would bring "huge benefits" for both countries, making trade cheaper, quicker and easier.
"We've entered a new global era, and that is one that requires us to step up, not to stand aside... by building deeper partnerships and alliances," Starmer said.
Modi said the visit would "go a long way in advancing the economic partnership between our nations".
They also agreed a partnership covering areas such as defence and climate, and said they would strengthen co-operation on tackling crime.
Under the trade agreement, tariffs on Scotch whisky will drop to 75 per cent from 150 per cent immediately, and then slide to 40 per cent over the next decade, according to the British government. On cars, India will cut duties to 10 per cent from over 100% under a quota system that will be gradually liberalised.
In return, Indian manufacturers will gain access to the UK market for electric and hybrid vehicles, also under a quota system.
The ministry has said 99% of Indian exports to Britain would benefit from zero duties under the deal, including textiles, while Britain will see reductions on 90% of its tariff lines, with the average tariff UK firms face dropping to 3 per cent from 15 per cent.
While it is Britain's biggest deal since Brexit, the projected boost to British economic output, of 4.8 billion pounds a year by 2040, is small compared to the country's gross domestic product of 2.6 trillion pounds in 2024.
The Office for Budget Responsibility (OBR) has forecast that UK exports and imports will be about 15 per cent lower in the long run compared with if Britain had stayed in the EU.
In its first year in power, Britain's Labour government has launched a reset of ties with the EU in order to smooth trade friction, while also clinching some tariff relief from the United States and the India trade deal.
"In an era of rising protectionism, today's announcement sends a powerful signal that the UK is open for business," said Rain Newton-Smith, the chief executive of the Confederation of British Industry.
The India deal will also facilitate easier access for temporary business visitors, though visas are not covered. Britain and India also agreed to ensure workers no longer have to make social security contributions in both India and Britain during temporary postings in the other country.
Under the trade deal, British firms will be able to access India's procurement market for projects in sectors such as clean energy, and it also covers services sectors such as insurance.
India didn't succeed in its efforts to get an exemption from Britain's Carbon Border Adjustment Mechanism (CBAM) - which could levy higher taxes on polluters from 2027 - as part of the deal. Meanwhile talks over a separate bilateral investment treaty are continuing.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Zawya
18 minutes ago
- Zawya
'America First' agenda could leave US dollar behind: Pelosky
(The views expressed here are those of the author, the Founder and Global Strategist at TPW Advisory) NEW YORK - Europe and Asia could leverage U.S. President Donald Trump's "America First" strategy for their own benefit, eventually spurring the development of regional tripolar FX blocs that could erode the dominance of the U.S. dollar and reshape global markets. The dollar has struggled this year, especially since Trump's April 2 tariff announcement. While the currency is on pace for one of its strongest weeks this year after jumping around 1% on Monday following the announcement of U.S.-EU trade deal, this short-term move doesn't change the long-term trends that could undermine the greenback's position. MOVING IN REVERSE Economic dominance in the future could largely depend on access to affordable, efficient energy to power artificial intelligence technologies. And in the race to dominate the industries of the future, the U.S. is arguably going in reverse. It's retreating from the renewables space, as seen in the administration's recent move to eliminate many clean energy subsidies. The president appears to be making the bet that the U.S. can maintain energy dominance indefinitely by relying on its own fossil fuel resources. This could ultimately result in uncompetitive power costs in the future, especially given that China is already dominating in clean energy technologies like solar and electric vehicles. As historian Adam Tooze argues, "for the first time in two centuries the West is no longer the leader in future technologies but the follower." TWIN DEFICITS While Trump may be seeking to enhance American self-sufficiency, the administration's policies may actually be increasing the country's dependency on foreign capital. Trump's recently passed budget bill – which looks pretty ugly to fiscal watchdogs despite its name – could cement the U.S.'s position as the world's biggest capital importer by adding an expected $3.4 trillion to the U.S. deficit over the next decade, according to estimates by the nonpartisan Congressional Budget Office, potentially locking in 6% to 7% budget deficits for years. Importantly, the U.S. has also been running current account deficits of roughly 4% over the past several years, and this widened to 6% of GDP in Q1 2025, according to the U.S. Bureau of Economic Analysis. By spending beyond its means and running these twin deficits, the U.S. will continue to require large amounts of foreign capital inflows. But unfortunately for Washington, this capital may soon be harder to come by, if both Europe and Asia seek to keep more of it closer to home. Europe is pushing for increased defense spending, as seen in its new goal to spend 5% of GDP on defense in the coming decade. While the bloc has agreed to increase U.S. energy purchases through the recently announced U.S. trade deal, much of that agreement remains up in the air and the volumes suggested are pretty unrealistic. Meanwhile, Asia has begun to trade more internally, as China has been focusing on export diversification. TRI-POLAR FX BLOCS A growing regionalization of supply chains began during the pandemic and appears to be accelerating as Trump seeks to drive production back to the U.S. and all major global powers focus on securing regional raw material access (e.g., rare earths and other critical minerals) for national security purposes. This shift could eventually create the foundation for true regional FX blocs across Asia, Europe and the Americas. This development would have a major impact on the global economy, currency values and capital markets, arguably providing a more balanced global economy with three poles of supply and demand, each attuned to their own regional dynamics rather than the current set-up whereby the global economy responds primarily to the Federal Reserve and U.S. internal dynamics. Recently, European policymakers have discussed what ECB President Christine Lagarde has termed a 'Global Euro' moment, one built upon a European Savings and Investment Union designed to foster both a European safe-haven asset that could eventually compete with U.S. Treasuries and deeper, more liquid European capital markets to fund European infrastructure and innovation. Of course, this won't be an overnight shift. The dollar remains the world's dominant reserve currency, and the U.S. debt market is estimated to be more than three times the size of Europe's, according to the World Economic Forum. But simply having a larger percentage of European capital stay at home could make a huge difference. Europe's current account surplus has averaged roughly $400 billion over the past few years, and Europe invests roughly $300 billion per year in offshore financial assets, according to the New York Times. Within Asia, Pan Gongsheng, Governor of the People's Bank of China, has recently highlighted China's interest in having the yuan play a larger role in a multi-polar currency world. Other officials soon followed, discussing how China plans to improve home market access for foreign capital while expanding opportunities for the Chinese to invest abroad. While China's capital account remains closed, Asian currencies already primarily trade off the yuan rather than the U.S. dollar. Even though China faces challenges, such as its fight against deflation, its efforts on this front – namely, boosting consumption and reining in excess supply, especially in the renewable energy space across solar, wind and batteries – could ultimately help attract more foreign capital by boosting China's growth profile and corporate earnings. There is obviously no guarantee that these measures will be successful, but the government's intense focus on achieving these goals is evident. The recent decision to provide $12.4 billion in childcare subsidies suggests a potential policy Rubicon has been crossed, as China has typically resisted these types of direct fiscal stimulus measures in the past. In a world of currency blocs, both Europe and Asia could emerge as potential winners, as they erode the U.S.'s position as the world's financial powerhouse. So while many investors may get lost in the short-term currency noise, it might be wise to instead focus on the long-term signal. (The views expressed here are those of Jay Pelosky, the Founder and Global Strategist at TPW Advisory, a NYC-based investment advisory firm. You can follow Jay on Substack at The Tri Polar World). Enjoying this column? Check out Reuters Open Interest (ROI), your essential new source for global financial commentary. ROI delivers thought-provoking, data-driven analysis of everything from swap rates to soybeans. Markets are moving faster than ever. ROI, can help you keep up. Follow ROI on LinkedIn, and X. (Writing by Jay Pelosky; Editing by Anna Szymanski and Jamie Freed)
Khaleej Times
an hour ago
- Khaleej Times
Trump orders tariffs on dozens of countries, to take effect in a week
President Donald Trump ordered the reimposition of tariffs on dozens of trading partners Thursday, his cornerstone strategy for reshaping global trade to benefit the US economy. However, in a minor reprieve that opens the door to further negotiations, the White House said these measures will take effect in a week, not Friday as previously expected. The tariffs are a demonstration of raw economic power that Trump sees putting US exporters in a stronger position while encouraging domestic manufacturing by keeping out foreign imports. But the muscular approach has raised fears of inflation and other economic fallout in the world's biggest economy. And with questions hanging over the effectiveness of bilateral trade deals already struck, including with the European Union and Japan, the outcome of Trump's plan remained uncertain. Trump's new measures in an executive order raises duties on nearly 70 economies, from a current 10 per cent level imposed in April when he unleashed "reciprocal" tariffs citing unfair trade practices. The steeper levels, varying by trading partner, go as high as 41 per cent. Trump also adjusted some tariff levels threatened in April, with Switzerland now facing a higher 39 per cent duty and Thailand a lower 19 per cent rate. The tariff on Taiwanese products was revised down to 20 per cent, but its President Lai Ching-te vowed to seek an even lower level. Trump separately hiked tariffs on Canadian goods to 35 per cent, though indicating in an NBC interview he was open to further talks. Canada and Mexico face a separate tariff regime. But exemptions remain for imports entering the United States under a North American trade pact. "No doubt about it, the executive order and related agreements concluded over the past few months tears up the trade rule book that has governed international trade since World War II," said Wendy Cutler, senior vice president of the Asia Society Policy Institute. "Whether our partners can preserve it without the United States is an open question," she added. Frantic negotiations The elevated duties come after Washington twice postponed their implementation amid a frantic series of negotiations, alongside announcements of new duties and deals with partners. Just Thursday, Trump announced he was delaying a tariff hike on Mexican products, keeping levels at 25 per cent with existing exemptions. The 90-day postponement followed talks with his counterpart Claudia Sheinbaum. The 79-year-old Republican has made tariffs core to his protectionist brand of hard-right politics. On Thursday, he claimed that the US economy had "no chance of survival or success" without tariffs. But the latest salvo came amid legal challenges against Trump's use of emergency economic powers. After a lower court said the president exceeded his authority, the US Court of Appeals heard arguments Thursday in cases against Trump's blanket tariffs targeting different countries. While Trump has touted a surge in customs revenues this year, economists warn the duties could fuel inflation. Proponents of his policy argue their impact will be one-off, but analysts are awaiting further data to gauge for more persistent effects. China remains a question mark Those who managed to strike deals with Washington to avert steeper threatened levies were Vietnam, Japan, Indonesia, the Philippines, South Korea and the EU. Britain also reached a pact with the United States, although it was not originally targeted by higher "reciprocal" tariffs. For Canada, transshipped goods to evade its 35 per cent duty would face even higher levels, said a White House fact sheet. Its trade ties with Washington faced renewed threat after Prime Minister Mark Carney announced plans to recognise a Palestinian state at the UN General Assembly in September. Trump's latest order however appeared to raise tariffs on several countries not initially targeted in April, to 15 per cent, including Ecuador, Ghana and Iceland. Notably excluded from the drama was China, which faces an August 12 deadline instead, when duties could bounce back to higher levels. Washington and Beijing at one point brought tit-for-tat tariffs to triple-digit levels, but both countries have agreed to temporarily lower these duties and are working to extend their truce.
Zawya
an hour ago
- Zawya
Asian shares fall as US unleashes fresh tariffs, jobs data up next
SYDNEY: Asian shares fell on Friday after the U.S. slapped dozens of trading partners with steep tariffs, while investors anxiously await U.S. jobs data that could make or break the case for a Fed rate cut next month. Late on Thursday, President Donald Trump signed an executive order imposing tariffs ranging from 10% to 41% on U.S. imports from dozens of countries and foreign locations. Rates were set at 25% for India's U.S.-bound exports, 20% for Taiwan's, 19% for Thailand's and 15% for South Korea's. He also increased duties on Canadian goods to 35% from 25% for all products not covered by the U.S.-Mexico-Canada trade agreement, but gave Mexico a 90-day reprieve from higher tariffs to negotiate a broader trade deal. Taiwan's President Lai Ching-te said the rate is "temporary" and is expected to be reduced further once a deal is reached. "At this point, the reaction in markets has been modest, and I think part of the reason for that is the recent trade deals with the EU, Japan, and South Korea have certainly helped to cushion the impact," said Tony Sycamore, analyst at IG. "The market now, I think, has probably taken the view that these trade tariff levels can be renegotiated, can be walked lower over the course of time." MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.7%, bringing the total loss this week to 1.8%. South Korea's KOSPI plunged 3% while Taiwanese shares fell 0.9%. Japan's Nikkei dropped 0.4%. Chinese blue chips were flat and Hong Kong's Hang Seng index eked out a small gain of 0.2%. EUROSTOXX 50 futures slipped 0.2%. Both Nasdaq futures and S&P 500 futures eased 0.2% after earnings from Amazon failed to live up to lofty expectations, sending its shares tumbling 6.6% after hours. Apple, meanwhile, forecast revenue well above analysts' estimates, following strong June-quarter results supported by customers buying iPhones early to avoid tariffs. Its shares were up 2.4% after hours. Overnight, Wall Street failed to hold onto an earlier rally. Data showed inflation picked up in June, with new tariffs pushing prices higher and stoking expectations that price pressures could intensify, while weekly jobless claims signalled the labour market remained on a stable footing. Fed funds futures imply just a 39% chance of a rate cut in September, compared with 65% before the Federal Reserve held rates steady on Wednesday, according to the CME's FedWatch. Much now will depend on the U.S. jobs data due later in the day and any upside surprise could price out the chance for a cut next month. Forecasts are centred on a rise of 110,000 in July, while the jobless rate likely ticked up to 4.2% from 4.1%. The greenback has found support from fading prospects of imminent U.S. rate cuts, with the dollar index up 2.5% this week against its peers to 100.1, the highest level in two months. That is its biggest weekly rise since late 2022. The Canadian dollar was little impacted by the tariff news, having already fallen about 1% this week to a 10-week low. The yen was the biggest loser overnight, with the dollar up 0.8% to 150.7 yen, the highest since late March. The Bank of Japan held interest rates steady on Thursday and revised up its near-term inflation expectation but Governor Kazuo Ueda sounded a little dovish. Treasuries were largely steady on Friday. Benchmark 10-year U.S. Treasury yields ticked up 1 basis point to 4.374%, after slipping 2 bps overnight. In commodity markets, oil prices were steady after falling 1% overnight. U.S. crude rose 0.1% to $69.36 per barrel, while Brent was at $71.84 per barrel, up 0.2%. Spot gold prices were off a fraction at $3,286 an ounce.
