Centre Says Impact on Indian Economy Will Be Minimal as National Interest Remains Priority

New Delhi, August 2, 2025: The Indian government has formally notified its decision to impose retaliatory tariffs on select goods from the United Kingdom and the European Union, in response to their unilateral carbon border adjustment measures. The Centre stated that these tariffs target “no-go” areas, with national interest remaining the primary focus.

A senior official clarified that these trade restrictions may affect specific sectors, but they will likely have only a limited impact on India’s broader economy. The official emphasized that the country’s long-term commitment to protecting its sovereignty and trade interests outweighs the temporary challenges posed by the tariffs.

India’s action comes after the UK and EU introduced the Carbon Border Adjustment Mechanism (CBAM), which affects carbon-intensive goods. Indian officials claim these unilateral measures hurt developing economies and violate global trade norms.

The tariffs are part of a broader recalibration of India’s trade strategy. Officials indicated that the move protects domestic producers from discriminatory carbon taxes. Goods affected include aluminum, steel, and certain agricultural items.

“Retaliation is the last resort, but we must protect India’s industrial and trade interests,” a commerce ministry source said. “We’ve carefully selected the goods for these tariffs, ensuring minimal disruption to essential imports.”

India exported goods worth $25.9 billion to the EU and $9.2 billion to the UK in FY24. The impact of tariffs on overall trade is expected to be marginal due to diversified export destinations and a resilient manufacturing base.

Officials added that small and medium enterprises (SMEs) might face some adjustments initially. However, the Centre plans to introduce support measures to help businesses navigate this phase. “We’re monitoring the situation and will adapt as needed,” said an official.

The World Trade Organization (WTO) has been approached by India to challenge the legality of CBAM. In parallel, diplomatic negotiations with the UK and EU are underway to seek exemptions or mutually agreeable solutions.

India’s tariff notification signals a strong policy shift that asserts trade sovereignty while balancing economic interests. The Centre reiterated that it remains open to constructive dialogue but will not compromise on fundamental principles.

Sources