India and the United States have once again failed to break through a prolonged impasse in negotiations over a bilateral trade agreement, underscoring the growing difficulty of managing economic ties between two countries that have otherwise sought to deepen their strategic partnership.
Senior officials on both sides have signalled that negotiations have effectively reached a standstill. India’s Finance Minister Nirmala Sitharaman recently described the talks as having reached a “plateau”, while US Trade Representative Jamieson Greer said a deal was not imminent.
The latest setback comes despite an agreement reached in February that had appeared to provide a path towards a broader trade deal. That framework reduced the punitive US tariff on most Indian goods from 50% to 18%, after an earlier round of negotiations collapsed.
The situation has since become more complicated. The US Supreme Court’s decision to invalidate President Donald Trump’s use of emergency powers to impose sweeping global tariffs resulted in a 10% baseline tariff, but it did not resolve the wider disagreements between Washington and New Delhi.
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Why Have the Talks Stalled?
The central problem is that the two countries continue to have different priorities over market access, tariffs and India’s energy relationship with Russia.
One of the most immediate complications is a new US law that could allow tariffs of up to 100% on Indian goods because of India’s continued purchases of Russian oil. New Delhi has not significantly reduced those purchases, despite pressure from Washington.
For India, accepting potentially much higher tariffs would undermine its efforts to obtain treatment comparable to that given to other major Asian trading partners, including Vietnam and China. For Washington, however, India’s energy purchases have become part of a broader effort to pressure countries that continue to buy Russian commodities and, in the US view, indirectly support Moscow’s war effort in Ukraine.
The disagreement therefore extends beyond conventional trade negotiations. Tariff policy has increasingly become connected to US foreign policy objectives, while India continues to defend its freedom to determine its own energy supplies.
Another source of uncertainty is a US Section 301 investigation into several countries over alleged excess industrial capacity. Washington is examining whether overproduction in those economies is harming or undercutting American industries.
Until the investigation is completed, India cannot be certain what additional tariffs its exporters could eventually face. That uncertainty makes it harder for New Delhi to determine how far it should go in offering concessions as part of a trade agreement.
The broader relationship has also faced tensions over the past year. A US military attack on a ship off Oman that killed three Indian seafarers caused friction, while India rejected Trump’s repeated claims that he had played a role in brokering a ceasefire between India and Pakistan.
These disputes have added to an already complicated political environment surrounding the trade negotiations.
What Is at Stake for India?
The economic consequences are significant because the United States is India’s largest export market.
Indian goods exports to the US increased to $42.79 billion between April and August, compared with $40.39 billion during the same period a year earlier. During the 2025/26 financial year, India recorded a trade surplus of almost $34 billion with the United States.
So far, Indian exports have shown considerable resilience despite the tariff uncertainty. New Delhi has also pointed out that some of its major export categories, including generic pharmaceuticals and smartphones, are not currently covered by the 10% baseline tariff.
But the situation could become considerably more difficult if additional US tariffs are imposed.
Higher tariffs could increase costs for Indian exporters, weaken business confidence and put further pressure on the Indian rupee, which is already trading close to record lows. Companies that depend heavily on access to the US market would face particularly strong pressure to either absorb the additional costs or pass them on to American consumers.
For India, therefore, the objective is not simply to secure a trade agreement. It is to obtain predictable access to one of its most important export markets without sacrificing politically sensitive sectors or its energy policy.
What Does India Want?
New Delhi’s negotiating position reflects the political importance of agriculture.
India has sought to protect sectors such as dairy, poultry, rice and wheat from extensive market-opening commitments. These sectors are particularly sensitive because millions of farmers depend on them and because agricultural liberalisation has significant domestic political consequences.
At the same time, India wants better tariff treatment for its exporters and greater certainty over the tariffs they will face in the US market.
That creates a difficult balancing act. New Delhi wants increased access to the American market, but it does not want to offer concessions in politically sensitive sectors without knowing whether those concessions will produce sufficiently stable and favourable treatment for Indian exports.
What Does Washington Want?
The Trump administration has placed greater emphasis on reducing India’s purchases of Russian crude.
Washington argues that India’s continued purchases of Russian oil provide Moscow with an important source of revenue and therefore indirectly support its ability to sustain the war in Ukraine.
India rejects the idea that its energy purchases should be dictated by geopolitical pressure. It argues that decisions over energy sourcing are primarily driven by the needs of its population of more than 1.4 billion people.
Russian crude became particularly important for India after Moscow’s full-scale invasion of Ukraine because it was available at substantial discounts. The continuing conflict in the Middle East has made energy security even more important by increasing uncertainty over global supplies and shipping routes.
This makes India’s position difficult to change quickly. Reducing Russian oil imports could satisfy an important US demand, but it could also raise India’s energy costs and expose the country to greater volatility in global energy markets.
Can the Talks Still Be Revived?
The negotiations are not necessarily heading for a permanent breakdown.
US Secretary of State Marco Rubio is expected to visit India later this month, potentially creating an opportunity for the two sides to reassess their positions. Indian Prime Minister Narendra Modi and Trump also spoke by phone on September 30 and are expected to speak again to review progress.
Modi is expected to travel to the United States in December for a G20 leaders’ meeting, providing another potential opportunity for political intervention if negotiations remain stalled.
The challenge is that the two sides now need to resolve issues that extend beyond tariffs.
India wants greater certainty and improved access to the US market while protecting agriculture and maintaining flexibility over energy imports. Washington wants deeper market access for American goods and stronger alignment from New Delhi on Russian oil.
That combination has made the trade negotiations as much a test of the broader India-US relationship as a conventional economic agreement.
A compromise remains possible, particularly if political leaders decide that the strategic importance of the relationship outweighs the remaining economic disagreements. But until Washington clarifies the future tariff regime and New Delhi determines how far it is willing to move on Russian oil and agricultural market access, a comprehensive trade deal is likely to remain difficult to reach.
With information from Reuters.
