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- Trade outlook spotlight on the United States
- Trade outlook spotlight on the United Kingdom
- Trade outlook spotlight on wider Europe
- Expanded horizons through trade agreements
- Key takeaways
Bilateral trade activity with large trade partners around the world continues an upward trend, signaling healthy opportunities for both India and key global players. Government policies and agreements, as well as global trade pressures and shifting demands on economies, continue to shape trade landscapes.
What does the future hold for trade relations between India and countries and regions such as the US, the UK, and wider Europe? Our article explores key opportunities for businesses and investors.
Trade outlook spotlight on the United States
The US is a strong trading partner for India, with exports to the US growing over 10% since 2023 and imports rising by more than 7% in the same period.1 However, new tariffs and policy changes—such as increased H-1B visa fees—threaten to raise barriers for Indian businesses, especially SMEs. Ongoing legal and regulatory challenges, including tariff disputes and complex customs rules, further complicate trade. While some sectors like pharmaceuticals and automobiles benefit from exemptions, industries like marine products, gems, and textiles are expected to face challenges due to the recent US tariffs and policies.
As countermeasures, in September, India announced a more simplified and revamped Goods and Services Tax (GST) to spur domestic demand for export products and thereby utilize their spare export production facilities. The Indian government is expediting the e-commerce export hub scheme for warehousing and trade facilitation and seeking to speed up the rollout of the export promotion mission, which comprises of trade finance schemes, programs to improve quality standards and market access, and activities for better recall value for Brand India.
Along with this, the Reserve Bank of India (RBI) has chosen to let the Indian rupee depreciate to all-time low against the dollar. A weaker rupee can boost export competitiveness and generate a larger surplus for government dividends, particularly helpful amid expected fiscal pressures from the reduced GST rates.
During this period, India and the United States continue negotiations aimed at finalizing a Bilateral Trade Agreement (BTA) by the end of 2025, which is expected to help mitigate the effects of current tariff pressures and restore trade balance. Both nations have reported convergence on core issues, with officials confirming that the legal framework is now under review.
Global tech companies are doubling down on India, reinforcing confidence in the country’s economy. In 2025, large tech firms announced significant investments to construct a global data center and expand Indian operations. These investments signal that US companies still view India as a strategic growth market, especially in tech and manufacturing, despite short-term trade tensions.
— Amar Budarapu, Partner, Dallas
Trade outlook spotlight on the United Kingdom
The UK-India Free Trade Agreement (FTA), agreed in July 2025, will soon replace the current framework and further reduce trade barriers. The FTA phases in tariff reductions for Indian goods entering the UK and lowers tariffs on UK exports such as automobiles. It also improves services access, supports professional mobility, and grants UK firms access to Indian procurement above INR 200 crore (GBP 17.16 million). New digital trade standards will be introduced for cross-border data flows, cloud services, and digital payments.
UK investors in India will gain stronger protections and dispute resolution options, including a potential Bilateral Investment Treaty (BIT) and Investor-State Dispute Settlement (ISDS), benefiting sectors like infrastructure and renewables. Indian investors in the UK will benefit from phased tariff cuts, including on automobiles and machinery, as well as a three-year exemption from social security contributions for temporary workers.
M&A activity between the two jurisdictions is expected to see an uptick. Accelerated market access, enhanced IP protection and regulatory cooperation through the UK-India FTA will incentivize activity.
— Ash Tiwari, Partner, London
The FTA outlines sector-specific advantages, creating new opportunities for businesses to expand into each other’s markets and optimize supply chains.
— Samantha Mobley, Partner, London
Trade outlook spotlight on wider Europe
Trade between India and Europe continues to grow, with a high upside potential. Major European partners—UK, Switzerland, Germany, France, and others—remain vital to India, with recent free trade agreements enhancing mutual trade, investment and growth.
The highly anticipated TEPA (Trade and Economic Partnership Agreement), effective 1 Oct 2025, provides EFTA states with significant benefits in India, including the promotion and facilitation of a USD 100 billion investment to create 1 million jobs for India’s young workforce over a period of 15 years. Over the next decade, TEPA will gradually eliminate or reduce tariffs on most EFTA exports, aiding Swiss industries like machinery, pharmaceuticals, chemicals, luxury goods, and processed agricultural products.
TEPA enables early access to India’s market and helps diversify global trade with fewer barriers. Companies should assess export and investment opportunities, review supply chains for TEPA compliance, and calculate customs duty savings to optimize benefits.
— Philippe M. Reich, Partner, Zurich
The agreement also improves EFTA states’ access to India’s services sector—including finance, retail, and professional services—and strengthens intellectual property protections vital for innovative businesses. However, companies must still navigate technical barriers, tax, and compliance issues, and should review supply chains and contracts to fully leverage TEPA opportunities.
Expanded horizons through trade agreements
Despite the headwinds posed by global trade tensions and tariff barriers in 2025, India remains firmly focused on its own economic trajectory. With resilient domestic demand, strategic policy reforms, and a commitment to inclusive growth, the country continues to demonstrate that its long-term success is rooted in structural strength—not short-term fluctuations.
— Mini Menon vandePol, Global India Practice Chair
India’s current trade strategy is more than a response to global pressures—it’s a defining moment for its economic identity. Navigating tensions with both the US and China, India is striking a careful balance: managing risks while actively pursuing new opportunities through bilateral agreements with alternative trading partners such as the UK, Switzerland, the EU, Japan and Australia.
India’s independence in trade is being engaged on its own terms—diversely, strategically, and with autonomy. Ultimately, India’s rise will depend not just on economic indicators or global deals, but on its ability to shape the rules it plays by. For global companies, India remains an extremely attractive market. It is home to about one-third of the world’s STEM graduates, creating innovations in EVs, pharmaceuticals, and IT. This makes India a leading contender for global capability centers. India’s middle class is expected to exceed 700 million by 2030, fueling demand across electronics, automobiles, fintech, and FMCG.
India’s IPO market in 2025 has shown remarkable resilience and strategic growth, despite global economic volatility and trade tensions. It continues to offer deep domestic liquidity and a growing investor base. It’s a compelling route for global companies to raise capital.
Key takeaways
Businesses should employ key strategies to maximize benefits from shifting bilateral and multilateral trade agreements. Here are three ways to capitalize on opportunities between India and the US, UK, and Europe.
- Stay informed. Closely monitor evolving trade policies.
- Engage the right legal counsel. Unlock market access and, where relevant, navigate tariff complexity with the guidance of experts with both local expertise and a global network.
- Transact. Where relevant, benefit from the more advantageous environment presented by trade deals to get transformational cross-border deals done.
Footnotes:
1 India US Trade Statistics 2025: Sector-Wise Analysis & Growth Insights
This article is being provided as general information and does not constitute legal advice. Baker McKenzie does not practice Indian law and where Indian law advice is needed, we work closely with top India-qualified lawyers. We’d be happy to discuss your needs in India. For more information, please contact Mini Menon vandePol.