India free trade agreement edges closer after Parliament passes legislation

The US Congress approved a bill on Wednesday aimed at tightening sanctions on Russia by focusing on Moscow's key energy consumers – China and India – just ahead of Chinese President Xi Jinping's arrival in Washington for a bilateral summit with President Donald Trump. The "Lindsey Graham Sanctioning Russia and Iran Act of 2026" received a 262-159 vote in the House of Representatives, and the Senate had already passed it by an impressive 86-11 majority.

Named after the late Republican Senator Lindsey Graham, the legislation empowers President Trump to impose up to 100% tariffs on the five biggest importers of Russian oil and natural gas, a tactic the president has frequently utilized to leverage pressure and retaliation. Although the bill does not explicitly list the targeted countries, it is projected to hit major importers like China and India, potentially exempting nations with smaller shares of Russian energy, such as Japan, France, Hungary, and Belgium, which are actively seeking to reduce their dependency on Russian energy sources.

The legislation also includes additional punitive measures on Russia's energy, defense sectors, and the fleet of tankers used to bypass existing sanctions, alongside intensified sanctions on Iran. The move comes as Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng prepare for their final preparatory talks this weekend, preceding Xi Jinping's visit to Washington next week.

The aim is to finalize the summit's probable economic results, including potential tariff reductions on agricultural trade and the extension of the trade truce that was established in October last year. The bill against Russian oil exports to Beijing adds another layer of economic pressure as the US pushes China to sever commercial ties with Iran under its "Operation Economic Outcast" sanctions campaign.

Treasury Secretary Bessent expressed optimism about ongoing private discussions with his Chinese counterpart, He Lifeng, regarding the alleged involvement of Chinese banks in facilitating trade with Iran and potential actions taken by the US. During a House Financial Services Committee hearing, Bessent highlighted the administration's limited use of executive authority and tariffs to influence trading partners and advance economic interests.

Many Democrats in the House criticized the bill, arguing that it grants Trump "sweeping new tariff authorities" that could be abused to impose costs on American citizens. They questioned whether President Trump would refrain from using this broad language to target any nation he harbors personal grievances against. Following the Supreme Court's February ruling that Trump's tariff powers under the International Emergency Economic Powers Act were unconstitutional, the administration has resorted to using various measures under the 1974 Trade Act and other lesser-known laws and regulations.

In July, the administration imposed tariffs ranging from 10 to 12.5% on 60 economies, including China, Japan, South Korea, India, and EU member states, based on allegations of forced labor. Additionally, the US is expected to impose extra duties on 16 economies, including China, India, Japan, and South Korea, following another Section 301 probe into industrial capacity.

Trump also utilized Section 338 of the Tariff Act of 1930 to impose 50% tariffs on various Canadian goods last month after trade talks with Ottawa failed. The obscure 1930 trade enforcement provision, passed during the height of Depression-era protectionism, had never been used before and, theoretically, provides Trump with more extensive, quicker, and less restricted authority to levy tariffs than any other existing trade statute.

The US's increasing reliance on tariffs and sanctions has prompted targeted nations to develop workarounds and decrease their dependence on the US-led global financial system. Last week, Brics countries agreed to expand trade and payments in local currencies, solidifying their step towards de-dollarization as the bloc aims to challenge an assertive United States.

The "New Delhi Declaration 2026," adopted unanimously at the 18th Brics summit, stated that the group's Payment Task Force explored cross-border interoperability of payment and messaging channels and discussed using local currencies for trade settlements and investments.