Global trade is shifting as nations actively pursue regional agreements in Latin America, the Middle East, and ASEAN. Driven by a desire for enhanced economic cooperation and diversified partnerships beyond traditional Western markets, these deals focus on tariff reduction and increased market access.
Global trade is changing —and fast. A wave of new regional partnerships is underway as nations look to reduce their reliance on traditional Western European and North American markets to build stronger economic ties with each other.
One of the most closely watched developments is the recently concluded Free Trade Agreement (FTA) between India and the United Kingdom. After three years of meticulous negotiations, the comprehensive FTA was finalised on May 6, 2025.
This landmark agreement is poised to inject considerable momentum into the bilateral trade relationship, with projections suggesting a potential increase of £25.5 billion annually by 2040.
For India, the FTA unlocks significant market access to the UK, with the elimination of duties on 99% of its exports, encompassing vital sectors such as textiles, leather, agriculture, IT services, engineering goods, auto parts, and jewellery.
This enhanced access is expected to provide a substantial boost to these industries and generate new employment opportunities, particularly in labour-intensive sectors.
Moreover, the agreement includes ambitious provisions for the services sector and professional mobility, including a three-year social security waiver for Indian professionals working temporarily in the UK, offering considerable financial benefits to the IT and finance sectors. India also stands to gain from potentially lower input costs due to reduced tariffs on certain UK goods.
For the United Kingdom, the FTA with India presents an opportunity to tap into a large and rapidly expanding economy.
India will reduce tariffs on 90% of British goods, including significant reductions on automobiles (under quota), whisky and gin, food and drink products, medical devices, and cosmetics.
This improved access is expected to enhance the competitiveness of UK goods in the Indian market and create new export opportunities for British businesses.
The agreement is also anticipated to foster greater investment, technology transfer, and innovation between the two nations, particularly in emerging sectors like clean energy, potentially contributing to a £4.8 billion annual boost to the UK economy by 2040.
Across the Atlantic, the United Kingdom and the United States announced a “historic” Economic Prosperity Deal on May 8, 2025. While not a comprehensive free trade agreement, this deal signifies a commitment to strengthening economic ties by addressing previously imposed tariffs.
The United States will reduce tariffs on UK car exports to 10% (under a 100,000-vehicle annual quota) and eliminate the 25% tariff on UK steel and aluminium.
In return, the UK will provide a tariff-free quota for 13,000 metric tonnes of US beef and remove tariffs on US ethanol.
This agreement aims to provide immediate relief to key export sectors for both countries and lays the groundwork for deeper cooperation in digital trade and financial services, potentially enhancing economic security through collaboration on export controls and supply chain oversight.
The US also anticipates a significant boost to its agricultural exports, with an estimated $5 billion in new opportunities.
Looking towards the Asia-Pacific region, India and New Zealand are actively engaged in negotiations for a Free Trade Agreement, with the first round of discussions concluding on May 9, 2025.
The negotiations encompass trade in goods and services, trade facilitation, and mutually beneficial sectors for economic cooperation.
With merchandise trade between the two nations reaching USD 1.3 billion in FY24-25, there is a strong impetus to finalize the FTA by the end of 2025.
For India, the FTA holds the potential to boost exports in sectors like clothing, textiles, pharmaceuticals, engineering goods, and automotive components, while also improving supply chain integration and diversifying its trade partners.
New Zealand seeks commercially meaningful outcomes for its forestry and agricultural sectors, including potential access for dairy, meat, and wine, to India’s large and growing market, alongside enhanced investment opportunities.
India is also strengthening its economic ties with Latin America, as evidenced by the signing of the Terms of Reference on May 8, 2025, to expand its existing Preferential Trade Agreement (PTA) with Chile into a more Comprehensive Economic Partnership Agreement (CEPA).
The expanded CEPA aims to encompass a broader range of sectors, including digital services, investment promotion and cooperation, MSMEs, and critical minerals.
This move is expected to provide India with improved market access in Latin America for key sectors like pharmaceuticals, IT, engineering goods, and textiles, while also potentially securing access to Chile’s critical minerals, such as lithium, crucial for India’s clean energy ambitions.
For Chile, the agreement offers better access to India’s vast market for its products, including copper, lithium, and agricultural goods, and is expected to encourage increased Indian investment, contributing to Chile’s economic growth.
Furthermore, India and the European Union have reaffirmed their commitment to conclude their ongoing free trade agreement negotiations by the end of 2025, signalling a significant potential realignment of trade relationships.
Beyond these prominent agreements involving India and the UK, other regions are also witnessing significant trade developments.
The United Arab Emirates (UAE) has been particularly active in forging new economic partnerships through its Comprehensive Economic Partnership Agreement (CEPA) program, signing five new deals in 2025, bringing its total to 26. These agreements aim to reduce trade and investment barriers, diversify the UAE’s economy, and enhance its status as a global trade hub.
The EU has also initiated free trade talks with the UAE, indicating a move towards broader partnerships beyond traditional Western allies, focusing on sectors like renewable energy and digital trade.
In Southeast Asia, ASEAN announced the “substantial conclusion” of the ASEAN-China Free Trade Area (ACFTA) 3.0 in 2024, which includes new areas of cooperation such as the green and digital economy, with the signing expected in 2025.
Vietnam and the Philippines also finalized trade agreements with the UAE and South Korea, respectively, in 2024. Thailand concluded FTA negotiations with the European Free Trade Association (EFTA), marking its first such agreement with European countries.
The UK’s accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) in December 2024 further underscores the shifting global trade landscape.
The African Continental Free Trade Area (AfCFTA), operational since 2021, continues to be a major focus for economic integration across the continent, with the African Union announcing its operational phase in April 2024, focusing on key aspects like rules of origin and tariff concessions. Intra-African trade saw a modest increase in 2023, highlighting the ongoing efforts to boost economic ties within the continent.
In Latin America, while no major new comprehensive trade agreements have been signed recently within the region, there is a growing emphasis on nearshoring and diversifying trade relationships, particularly with the United States and Asia. India is also increasing its focus on trade and investment with Latin American nations.
The Middle East is witnessing increased economic engagement with Asia-Pacific, particularly China, with Saudi Arabia leading the first round of negotiations for a free trade agreement between the Gulf Cooperation Council (GCC) and Japan in December 2024.
Oman and India are also likely to finalise their CEPA in 2025.
Collectively, these recent trade agreements and ongoing negotiations underscore a global trend towards the diversification of economic partnerships and the fostering of regional cooperation.
