India-US Trade Deals Stalled: Key Reasons Behind the Delays
India and the United States have been negotiating a bilateral trade agreement for over a year, but both the comprehensive deal announced in February 2025 and the interim framework signed in February 2026 remain unfulfilled. Here is a breakdown of the developments that have hindered progress.
Background of the negotiations
In February 2025, Prime Minister Narendra Modi and then-US President Donald Trump committed to finalising a comprehensive Bilateral Trade Agreement (BTA) by fall 2025. However, as talks progressed, officials indicated that only an initial tranche might be achievable within that timeframe. Discussions intensified after Trump's 'Liberation Day' tariff announcement in April 2025, but a breakthrough remained elusive.
Sticking points and tariff escalation
Two major issues stalled the first tranche: India's reluctance to open its agricultural and dairy sectors to US exports, and its continued purchase of oil from Russia. In late July and early August 2025, Trump imposed tariffs on Indian imports, first 25% and then 50%, the latter as a penalty for India's Russian oil purchases. These tariffs froze negotiations until October 2025, when talks resumed.
The interim agreement framework
In February 2026, Modi and Trump signed a framework for an interim trade deal. This was not a final agreement but a blueprint for future negotiations. Under the framework, the US was to reduce tariffs on Indian imports to 18%, granting India a competitive edge. Both sides also agreed to provide preferential market access in sectors of mutual interest. Commerce Minister Piyush Goyal expressed confidence that the deal would be concluded by April or early May 2026.
Legal hurdles and tariff uncertainty
Shortly after the framework was signed, the US Supreme Court struck down the reciprocal tariff system that had underpinned the negotiations. The court ruled that the International Emergency Economic Powers Act did not authorise such tariffs. In response, Trump announced a flat 10% tariff on all imports under the Trade Act of 1974, citing the need to address the US trade deficit. This tariff was temporary, set to last 150 days until July 24, 2026. Trump later threatened to raise it to 15% but did not follow through. The US Court of International Trade also deemed these tariffs illegal, though an appeals court stayed that ruling.
New investigations add complexity
In March 2026, the Office of the US Trade Representative launched two investigations under Section 301 of the Trade Act. The first, targeting 16 economies including India, examines whether excess manufacturing capacity is being used to export to the US in a way that harms American businesses. The second, covering 60 countries including India, investigates whether these nations have taken sufficient steps to prohibit imports made with forced labour. In early June 2026, the US proposed a 12.5% tariff on imports from 54 countries under the forced labour investigation.
Current status
As of mid-2026, neither the comprehensive BTA nor the interim deal has been implemented. The legal challenges to US tariff authority and the new investigations have created further uncertainty. Both governments continue to engage in discussions, but no timeline for a final agreement has been announced.
