An India-U.S. Trade Deal Will Face Ongoing Hurdles

(HIMANSHU SHARMA/AFP via Getty Images)

A freight train on Aug. 26, 2025, in Ajmer India.

While a U.S.-India trade deal will bring some relief to Indian exporters, ambiguities over its scope, implementation timeline and myriad other flashpoints will keep the prospect of renewed U.S. tariffs and other coercive measures that undermine the deal on the table. On Feb. 2, U.S. President Donald Trump announced on social media that the United States and India had reached a trade deal that will lower so-called U.S. reciprocal tariffs on India from 25% to 18% and reduce Indian tariffs and nontariff barriers against the United States "to ZERO." Trump also claimed India had pledged to halt its purchases of Russian crude, increase purchases of U.S. and "potentially" Venezuelan oil, and purchase $500 billion of "U.S. Energy, Technology, Agriculture, Coal, and many other products." Subsequent statements from unnamed U.S. and Indian officials cited by various media outlets have supplied some additional purported details regarding the initial announcement. The United States will drop the additional 25% tariff it had placed on India in August 2025 for importing Russian oil. In addition, the $500 billion of goods Trump referenced will reportedly include both preexisting projects and new areas of spending. And India is poised to modestly open its sensitive agricultural sector under the agreement. Even so, much remains unclear about the deal, including precisely when the new tariffs will take effect and what goods India has pledged to purchase. It also remains unclear how committed India will be to halting purchases of Russian crude. Some Indian refiners reportedly said they would need a wind-down period to complete Russian oil purchases already being processed, and other refiners appeared to be awaiting advice from New Delhi on how to proceed. While Indian Prime Minister Narendra Modi has confirmed the two countries had reached an agreement and that U.S. tariffs on India would be lowered to 18%, Modi has yet to comment on the other aspects of the agreement, including whether his country would halt its purchases of Russian crude. Nevertheless, markets reacted positively to the deal's announcement, with Indian stocks and the rupee subsequently rising. Investors commended the agreement for easing the uncertainty linked to U.S. tariffs on India and the two sides' protracted trade negotiations.

Both U.S. and Indian officials have claimed they would provide additional details and/or documents related to the deal over the coming days, with one Indian official cited by Bloomberg on Feb. 3 saying the two sides would likely publish a joint statement in the next two to three days.
Kremlin spokesman Dmitry Peskov said Feb. 3 that India had yet to inform Moscow it would halt its Russian oil purchases, and added Russia was continuing to monitor developments linked to the U.S.-India deal.

The tentative U.S.-India trade agreement follows months of slow-moving negotiations that lingered as the United States secured deals with other major partners, and it comes on the heels of India finalizing its own landmark trade agreement with the European Union in late January. The combined 50% tariffs the United States had imposed on India were among the highest it had levied on any major trading partner, fueling unease among investors and diplomatic tensions between the countries as bilateral negotiations wore on, while other countries — including Asian countries like Japan, South Korea, Vietnam and Malaysia — reached deals with the United States. Media reports on the U.S.-India trade talks have suggested Indian refiners' lingering purchases of Russian oil were among the major sticking points to an agreement. In response, some refiners have recently scaled back these purchases, and New Delhi reportedly began collecting more granular data on them to move talks forward. India has also long remained resistant to opening some sectors of its economy to foreign competition, especially its agricultural sector, in part because of Indian farmers' substantial political influence. India has demonstrated some openness to facilitating foreign competition in its agricultural sector in recent weeks, however, namely under the reported terms of the EU-India trade agreement announced Jan. 26. The product of decades of negotiations, the deal calls for slashing Indian tariffs on European wines from 150% to 75%, and eventually to as low as 20%; slashing tariffs on European olive oil from 45% to 0% over five years; and eliminating tariffs of up to 50% from processed agricultural products like bread and confectioneries. That fairly ambitious and wide-ranging trade agreement may have played a role in driving India and the United States to conclude their own protracted negotiations, especially if the United States believed it was increasingly unlikely to secure a deal as good as that between India and the European Union.

The U.S. appointment of a close Trump associate, Sergio Gor, as U.S. ambassador to New Delhi around mid-January may also have facilitated the finalization of a U.S.-India trade deal. Gor served as Trump's director of the White House Presidential Personnel Office from January 2025 to October 2025, and he made clear his priority would be moving talks between India and the United States forward as negotiations increasingly wore on the two countries.
Prior efforts by New Delhi to ease access to its agricultural sector have, in recent years, triggered mass protests by Indian farmers' unions. The most severe and highest turnout of these protests occurred from 2020-21 and ultimately prompted New Delhi to withdraw the controversial bills that originally triggered the demonstrations. Farmers' protests resurged again in 2024-25, and while those protests were less disruptive than those in 2020-21, they nevertheless underscored farmers' lingering grievances and their enduring ability to push back against any efforts by New Delhi they believe may endanger their livelihoods.

While the agreement will bring relief to Indian exporters, the lack of details, potential disagreements over the deal's scope and implementation, and other potential flashpoints will keep the prospect alive of renewed U.S. tariffs and other coercive measures that undermine the deal. Based on confirmations by both Trump and Modi, it appears almost certain that U.S. tariffs on India will be slashed to 18%, which will bring significant relief to Indian exporters of labor-intensive goods like textiles and jewelry that were among those hardest hit by U.S. duties, alongside other key Indian exports to the United States like pharmaceuticals and chemicals. Additionally, the two sides' arrival at an agreement eases U.S.-India tensions and reduces some of the uncertainty for businesses and investors that the drawn-out negotiations generated. That said, lingering ambiguity on most of the deal's specifics means much will remain unclear regarding the scope of the deal, exemptions, timelines and other facets of implementation. Preliminary reports that the $500 billion of U.S. goods Trump claimed India would purchase include existing projects may temper any consequent boon to U.S. companies. It could also eventually rankle the Trump administration, which recently threatened new tariffs on South Korea for being slow to legislatively ratify its investment commitments under a July 2025 deal. India's long-standing resistance to opening its agricultural sector to foreign competition will also place an upper limit on the degree to which New Delhi eases relevant barriers for the United States. More broadly, myriad flashpoints remain that may prompt the United States to reimpose tariffs or take other punitive measures that undermine the deal. For example, while some Indian refiners have scaled back purchases of Russian oil, New Delhi and Moscow remain important partners, and India has benefitted from the discounts Russia has offered on its crude since the start of its 2022 war in Ukraine. India's noncommittal response to Washington's claims that it would halt Russia's oil purchases thus sustains particular uncertainty about whether India will fulfill its supposed pledge to U.S. satisfaction. Other potential triggers of U.S.-India tensions include India's ties to Iran, particularly through the Iranian-owned Chabahar Port, which India operates. Especially as Trump has repeatedly shown a willingness to reimpose tariffs or otherwise take punitive measures over a range of issues, a number of flashpoints will remain that could reinflame bilateral tensions and undermine the U.S.-India deal.

Another challenge that will remain for U.S.-India trade relations are U.S. Section 232 tariffs, which place 50% duties on goods like steel and aluminum, and which Indian exporters expect will continue despite the deal. This appears likely to help sustain tariffs on some $7.6 billion of Indian exports not covered by the recent deal's reduced 18% tariff.