India-US Trade Deal Delayed as Tariff Disputes and Investigations Extend Negotiations

Differences over agriculture, Russian oil, U.S. tariff policies and Section 301 investigations continue to postpone the proposed bilateral trade agreement.

India and the United States announced in February 2025 that they would work towards a comprehensive Bilateral Trade Agreement (BTA), with the initial objective of concluding the pact by fall 2025. Later, in February 2026, both countries signed a framework for an interim trade agreement that was expected to be implemented by April-May 2026. However, neither of these agreements has been finalised.

Following the announcement by Prime Minister Narendra Modi and U.S. President Donald Trump in February 2025, it became evident that concluding a comprehensive trade agreement would require additional negotiations. Government officials from both countries initially focused on completing the first phase of the agreement by fall 2025 (September-November 2025).

Negotiations intensified after April 2025 when the U.S. announced reciprocal tariffs during its "Liberation Day" initiative before temporarily pausing them for 90 days to facilitate trade discussions. Despite continued negotiations, differences remained over India's reluctance to open its agriculture and dairy sectors, as well as its decision to continue purchasing oil from Russia, preventing the first phase of the agreement from being concluded.

In late July and early August, President Trump announced tariff increases on imports from India, initially raising duties to 25% and later to 50%, with the higher rate described as a response to India's Russian oil imports. These developments temporarily interrupted negotiations before discussions resumed in October.

In February 2026, India and the United States agreed on a framework for an interim trade agreement. The framework outlined the structure for a future agreement rather than constituting a trade deal itself. At the time, Commerce Minister Piyush Goyal expressed confidence that the agreement could be completed by April or, at the latest, early May 2026.

The framework proposed reducing overall tariffs on Indian imports into the U.S. to 18%, aiming to improve India's tariff position relative to competing countries. Both sides also agreed to provide preferential market access in sectors of mutual interest.

Subsequent developments in the United States added further uncertainty to the negotiations. The U.S. Supreme Court invalidated the reciprocal tariff system, ruling that the International Emergency Economic Powers Act (IEEPA) did not authorise such tariffs, removing one of the legal foundations behind the tariff measures.

Following the ruling, President Trump announced plans to impose an additional flat 10% tariff on imports from all countries under Section 301 of the Trade Act of 1974 to address the U.S. trade deficit. Although initially described as temporary for 150 days up to July 24, the tariff was later revised to 15%, but implementation did not proceed.

Further uncertainty emerged after the Office of the U.S. Trade Representative (USTR) initiated two Section 301 investigations.

The first investigation covers 16 economies, including India, to determine whether manufacturing overcapacity is being used to increase exports to the U.S. in a manner that affects American industries.

The second investigation covers 60 countries, including India, to assess whether adequate measures have been taken to prevent imports produced through forced labour and whether such imports affect U.S. workers and businesses.

Separately, the U.S. government imposed a 12.5% import tariff on goods from 54 countries, including India, stating that the measure applies where countries have not implemented effective restrictions on imports produced using forced labour. While this does not imply that India uses forced labour, it indicates that the U.S. believes imports manufactured through forced labour have not been adequately restricted. India has made representations to the U.S. on the issue, with the final hearing scheduled for July 7. Findings from the excess capacity investigations are expected in mid-July.

India has reiterated its commitment to concluding the trade agreement while maintaining that it should receive comparative advantages over competing countries, as agreed during the February discussions. Before finalising the agreement, the outcome of the Section 301 investigations and tariff decisions will need to be completed.

Meanwhile, both countries continue negotiations on non-tariff aspects of the agreement, including enhanced market access, digital trade, supply chain resilience, reduction of non-tariff barriers and expanded cooperation in strategic sectors. The recent visit of USTR Jamieson Greer to India on June 23-24 did not produce any timeline for finalising the agreement.