Uncertainty over potential US trade action grows after Trump signs Graham Act, while a trade agreement could provide protection from additional tariff measures

An India-US trade deal could help India avoid the full 100 per cent tariff authorised under the Lindsay O Graham Sanctioning Russia and Iran Act of 2026 and provide protection from possible action under the ongoing Section 301 investigation into excess capacity, according to sources close to the negotiations.

Trade deal could limit tariff exposure

The legislation authorises the US President to impose the tariff but does not enforce it, leaving considerable room for negotiations. Any negotiated trade deal would cap the amount mentioned in the Bill, a source tracking the matter told Business Standard.

Uncertainty over further US trade action has increased since President Donald Trump signed the Graham Act, which allows tariffs of up to 100 per cent on the largest buyers of Russian oil and gas — a list that includes India.

The source said that while the Graham legislation was aimed at addressing Russia’s revenues and its ability to continue the war in Ukraine, it would not supersede a trade deal.

“In terms of the bilateral tariffs and the trade deal, it could be superseded,” the source underlined.

Pending US actions add trade risks

Delaying a trade deal may also leave India increasingly exposed to other pending US trade actions, the source said.

“There are consequences. Every week that there’s no trade deal, India may be a little bit more vulnerable to other pending actions,” the source noted.

Had a trade agreement already been concluded, India’s position following the passage of the sanctions legislation would have been clearer.

“Even before the Graham Bill was passed, the potential for the Graham Bill was there. And if there had been a trade deal, while India would have been reported as a top buyer, it could have been protected because of the deal,” the official source said.

Protection could extend to Section 301 probe

Similar protection could apply to the outcome of the US Trade Representative’s Section 301 investigation into excess capacity, the source said.

The source said, “Everyone’s waiting for the Section 301 results. But If India had a trade deal, we wouldn't need to worry about whatever it comes out. The agreement would have accorded protection.”

While New Delhi has been saying that the trade deal has mostly been negotiated, it maintains that it will finalise it only if guaranteed an edge over competing economies such as Vietnam, Bangladesh and Indonesia.

The source said Washington has the ability to adjust existing arrangements as needed, pointing to the Section 301 forced-labour case as precedent.

India was initially slated for the higher 12.5 per cent tariff but ultimately secured the lower 10 per cent rate, gaining an edge over China, Vietnam, Thailand and the Philippines, which remained at 12.5 per cent.

“Something similar can always be worked out,” the source said.

India’s position on Russian oil

On Russian oil, India has indicated that it has no intention to stop its purchase as it was essential for the energy security of its 1.4 billion population.