Trade negotiations between India and the United States have once again reached an impasse, with senior officials from both countries acknowledging a stall in progress toward a comprehensive bilateral agreement. The two nations had earlier agreed in February to reduce tariffs from 50 percent to 18 percent on most Indian goods after previous talks collapsed last year. However, a final deal remains elusive amid rising tensions and unresolved issues.
The stalemate comes after the U.S. Supreme Court invalidated President Donald Trump’s broad use of emergency powers for imposing global tariffs, which lowered the baseline rate to 10 percent. Yet, despite this development, no new framework has been finalized. Indian Finance Minister Nirmala Sitharaman described the talks as having reached a “plateau” with limited scope for advancement. Meanwhile, U.S. Trade Representative Jamieson Greer stated that a deal is not “imminent.”
Neither government has explicitly outlined all reasons behind the delay, but recent complications have included a new U.S. law allowing tariffs of up to 100 percent on Indian imports linked to New Delhi’s ongoing purchases of Russian oil. Despite pressures, India has not significantly reduced these purchases, which remain a major sticking point. This issue directly conflicts with Indian efforts to secure tariff terms more favorable than those granted to comparable economies like Vietnam and China.
Further obstacles stem from an unresolved Section 301 trade investigation initiated by the United States. The probe examines alleged excess industrial capacity in several countries, including India, to determine if such overproduction unfairly harms American industries. Completion of this investigation is seen as critical to setting definitive tariff levels on Indian goods. Until then, the final tariff regime remains uncertain.
Bilateral relations have also faced strain this year due to a series of unsettling incidents such as a U.S. military strike near Oman that killed three Indian seafarers and India’s rejection of Trump’s claims regarding ceasefire negotiations with Pakistan. These events have added tension to the trade dynamics between the two countries.
Despite these challenges, India’s exports to the United States have increased. Goods exports grew to $42.79 billion between April and August, up from $40.39 billion in the previous year, contributing to a trade surplus close to $34 billion for the fiscal year 2025/26. India maintains that key export sectors—including generic pharmaceuticals and smartphones—are exempt from the 10 percent tariff imposed earlier.
Analysts warn, however, that without a finalized trade agreement, India faces risks of heightened U.S. tariffs due to ongoing investigations and sanctions laws. These could adversely affect Indian businesses, investor confidence, and weaken the Indian rupee, which is already near record lows.
India continues to prioritize protecting politically sensitive sectors such as agriculture, seeking to exclude dairy, poultry, rice, wheat, and other farm products from market-opening commitments. New Delhi demands greater clarity on U.S. tariff policies before offering significant concessions. U.S. officials, including Secretary of State Marco Rubio, are scheduled to visit India later this month to potentially revive negotiations.
Indian Prime Minister Narendra Modi and President Trump, who spoke on September 30, are expected to maintain dialogue ahead of Modi’s planned visit to the United States in December for the G20 summit. This visit may present another opportunity to advance stalled trade discussions.