Washington’s recent tariff moves have put pressure on Indian exports to the US. Half of the 50% tariffs the US placed on Indian commodities in August were punitive measures related to India’s imports of Russian energy.
Following multiple rounds of negotiations, India and the US are making great strides toward concluding a new bilateral trade agreement. Officials from both countries have confirmed that the legal framework is currently being reviewed, and they have indicated convergence on key areas. However, conversations are still hampered by concerns about high US tariffs on Indian imports.
India and the US are negotiating innovative trade agreements to address declining Indian exports due to tariff hikes. The US introduced 50% tariffs on Indian goods in August, half imposed as penal measures linked to India’s energy imports from Russia. This has led to a 12% year-on-year decline in Indian goods exports to the US in September, despite an overall rise in India’s total exports. The persistence of these tariffs remains a major obstacle, prompting both sides to seek solutions to mitigate adverse effects on exporters and maintain bilateral trade momentum.
Talks between China and the US are progressing well, with both parties finding common ground on pending issues. The proposed trade pact is not a conventional free trade agreement negotiation, as it diverges from World Trade Organization norms. The customised approach reflects the unique priorities of both economies, aiming to provide targeted relief and open new channels of cooperation as they navigate complex global trade dynamics. The official stated that there are no major gaps in the deal, and most complex matters have been addressed.
US President Donald Trump has expressed high-level political engagement in trade negotiations with India, highlighting the geopolitical context and strategic interests, particularly regarding energy trade and sanctions. The ongoing negotiations focus on resolving practical trade barriers and legal complexities, rather than simply reducing tariffs. Both countries emphasize constructive dialogue and aim to set a new benchmark for future bilateral trade arrangements. However, the issue of 50% tariffs, half of which are penal due to India’s procurement of Russian energy, continues to overshadow the talks. The year-on-year decline in goods exports to the US highlights the immediate economic stakes tied to the successful resolution of this aspect of the negotiation.
The final legal texts are being reviewed and negotiators are working to resolve remaining gaps, with the focus on whether the agreement will address the tariff issue, which is expected to impact bilateral commerce and India-US economic and strategic relations.
