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Why India-US trade talks stalled again?

By Sohail Khan 6 October 2026, 9:08 pm

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Business News›News›Economy›Foreign Trade›Explainer: Why have India-US trade talks stalled again and what's next?

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Explainer: Why have India-US trade talks stalled again and what's next?
Synopsis

Amid rising tariffs and geopolitical tensions, trade negotiations between India and the United States have reached an impasse. The US has voiced concerns over India's ongoing acquisition of Russian oil, which could trigger higher tariffs. India aims to safeguard its vital agricultural sectors during talks while advocating for enhanced export conditions. Future discussions, particularly with Secretary of State Marco Rubio's upcoming visit, may provide an opportunity for resolution.

NEW DELHI: Senior officials in India and the United States have indicated long-running efforts to finalise a bilateral trade agreement have stalled, again.

Both nations had agreed to a framework for the deal in February which brought down to 18% from 50% the punitive tariff on most Indian goods imposed in August last year after a previous round of talks collapsed.

In the meantime, the Supreme Court invalidated US President Donald Trump's use of emergency powers to impose sweeping tariffs globally, leading to a 10% baseline rate. But a final deal between two of the world's biggest economies remains elusive.

WHY HAVE TRADE TALKS HIT A WALL?

Trade talks have reached a "plateau" with little room for manoeuvre, Finance Minister Nirmala Sitharaman said earlier this week, following United States Trade Representative Jamieson Greer's comment that a deal is not "imminent."

Neither side has detailed reasons for the delay in finalising the deal.

But talks in the past months have met with complications, most recently a new US law that paves the way for up to 100% tariffs on Indian goods because of New Delhi's purchase of Russian oil. Those purchases have not been significantly reduced.

The potentially stiff levy goes against New Delhi's efforts to secure tariff terms better than peer economies, including Vietnam and China.

A deal has also been held back because Washington is yet to complete a Section 301 trade investigation on several nations over alleged excess industrial capacity. The probe is to evaluate whether such overproduction is hurting or undercutting American industries.

Unless this probe is completed, it is hard to tell what final tariff Indian goods will attract.

Overall, bilateral ties between India and the US have been rocky this past year, casting a shadow on efforts to stabilise their trade partnership.

Events including a US military attack on a ship off Oman that killed three Indian seafarers and India rejecting Trump's repeated claim of brokering a ceasefire with Pakistan have hurt relations.

WHAT IS AT STAKE?

The US is India's largest export market and exports have so far been resilient.

India's goods exports to the United States rose to $42.79 billion in April-August from $40.39 billion a year earlier. In the fiscal year 2025/26, India enjoyed a nearly $34 billion trade surplus with the US.

India says many of its largest export categories to the US, including generic pharmaceuticals and smartphones, are not subject to the current 10% levy.

But analysts say that in the absence of a trade deal, India risks higher US tariffs from the ongoing trade probe and purchase of Russian oil, even if it could negotiate for waivers under the sanctions law.

Another increase in tariffs could hurt businesses, dent market sentiment and hurt the Indian currency, which is already trading close to record lows.

WHAT MORE DO THE TWO SIDES WANT?

India is striving to protect politically sensitive sectors, particularly agriculture, while securing better tariff treatment for its exporters.

India has sought to keep dairy, poultry, rice, wheat and other farm products outside the scope of market-opening commitments. It wants greater certainty over US tariffs before making concessions.

The Trump administration wants India to cut Russian oil purchases, arguing Indian purchases of Russian crude help finance the war in Ukraine.

India says decisions on where to source fuel are driven by the energy needs of its 1.4-billion-strong population.

Russian crude became particularly important after Moscow's full-scale invasion of Ukraine because it was available at discounted prices. The war in the Middle East and resulting disruptions have sharpened the calculation over energy imports.

ARE FURTHER TALKS PLANNED?

US Secretary of State Marco Rubio is expected to visit India later this month, when two-way talks could make some progress.

Modi and Trump, who spoke by phone on September 30, are also expected to speak again soon to review progress. Modi is expected to visit the US in December for a G20 leaders' meet.

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