India-US Trade Deal: Why the Agreement Is Still Pending

India-US Trade Deal Latest News

• Recently, US Trade Representative Jamieson Greer said that India-US trade talks are in their “final phase,” but signing is “not imminent” as both sides work to resolve “sticking points.” 
• This came as a surprise — India and the US had already agreed to a framework agreement in February 2026, and Commerce Ministry officials had maintained a deal was essentially reached, with India believed to be holding out for better tariff rates.

Mixed Signals: The Russia Sanctions Law

• In September 2026, President Donald Trump signed the Lindsey O. Graham Sanctioning Russia and Iran Act of 2026 into law.
• It allows for tariffs of up to 100% on major buyers of Russian energy — a category that includes India.
• Unlike the earlier US tariff mechanism under the International Emergency Economic Powers Act (which was struck down by the US Supreme Court), these new tariffs cannot be legally challenged.
• In February, the US had agreed to remove an additional 25% tariff on Indian imports, in recognition of India’s commitment to stop purchasing Russian oil. 
• In return, India committed to negotiate robust bilateral digital trade rules addressing discriminatory digital trade barriers. 
• The new Russia sanctions law now threatens to undo that earlier concession — sending conflicting signals to India.

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The Section 301 Investigation

• Separately, India awaits a decision on a US investigation under Section 301 of the Trade Act of 1974.
  • This probe is meant to determine whether India has “excess industrial capacity” that is harming American companies.
  • The first round of Section 301 action already resulted in 10% tariffs.
  • A second round is now expected.
• Indian exporters report that this uncertainty is changing order patterns — US buyers are no longer placing bulk orders and are instead diversifying their import sources. 
• This could mean lower export orders for Indian businesses until a deal is finalised.

India’s Position

• Top US trade partners currently sit in a 10–15% tariff bracket, and India has sought better rates than ASEAN countries and China. 
• India countered the “excess capacity” claim, stating India’s manufacturing serves both domestic and global needs without structural overcapacity. 
• India shares G20 concerns about trade-distorting support leading to dumping, but addresses this through evidence-based WTO measures — anti-dumping and countervailing duties — rather than unilateral tariffs.

A Lopsided Framework?

• Under the February framework agreement, India committed to purchasing $500 billion worth of US products over five years — covering energy, aircraft and aircraft parts, precious metals, technology, and coking coal.
• Experts point out there is no reciprocal US commitment to purchase Indian products, making the deal structurally one-sided.

The Sovereignty Concern 

• Beyond goods, the framework also includes a pledge to “strengthen economic security alignment”.
• This covers supply chain resilience, addressing “non-market policies of third parties,” and cooperation on inbound/outbound investment reviews and export controls.
• Trade experts warned: If India is compelled to negotiate provisions on economic security alignment which are similar to those contained in the various Agreements for Reciprocal Trade between the US and some countries, then it would substantially curtail India’s sovereignty on foreign policy, trade and other economic matters.

A Pattern Beyond Trade: The Canada Precedent

• Analysts draw a parallel with the US-Canada trade war. Canadian PM Mark Carney has hinted that the US wanted Canada to refrain from signing a deal with China as part of their bilateral pact.
• This suggests that American trade demands increasingly extend into foreign policy alignment, not just goods and tariffs. 
• The implication is that US demands from India may similarly extend beyond conventional trade issues.

US Criticism of India’s Domestic Investment Rules

• In an investment climate report released last month, the US State Department flagged specific Indian regulatory concerns:
  • India’s Foreign Exchange Management Act (FEMA) restricts concurrent FDI and FPI.
    • This creates what the report calls a “redundant and uniquely burdensome restriction that blocks independent funds within the same investment group from participating in IPOs.
  • The effective tax rate paid by foreign banks is 4.63 percentage points higher than domestic banks, at 38.22%.
  • The State Department warned this higher effective tax burden may ultimately affect the relative attractiveness of India as a market for foreign lenders, potentially influencing their capital allocation, pricing, and scale of local operations.

Conclusion

• The delay isn’t really about tariff percentages — it’s about how much economic sovereignty India is willing to trade for market access. 
• Between the Russia sanctions law, a pending Section 301 probe, a one-sided purchase commitment, and demands for “economic security alignment,” India faces leverage on multiple fronts simultaneously. 
• Until these threads are untangled, a signed deal will likely remain, as Greer put it, not imminent.

Source: IE