Why have India-US trade talks stalled again and what’s next?

India and the United States have been unable to finalize a bilateral trade agreement, with talks hitting a plateau. The deal, first agreed upon in February 2025, aimed to reduce punitive tariffs on Indian goods from 50% to 18%. However, recent complications have hindered progress. The United States has been considering up to 100% tariffs on Indian goods due to New Delhi's continued purchases of Russian oil, despite a reduction.

This would violate India's efforts to secure better tariff terms than its peers, such as Vietnam and China. Additionally, the United States is still investigating several nations for alleged excess industrial capacity under Section 301, delaying the final tariff determination for Indian goods. Strained bilateral relations between India and the US have further complicated the situation, with events like a US military attack on a ship off Oman and India rejecting Trump's claim of brokering a ceasefire with Pakistan.

Despite these setbacks, both nations remain vital trade partners, with India's exports to the US showing resilience. The US is India's largest export market, and a lack of a trade agreement could result in higher tariffs, negatively impacting businesses, market sentiment, and the Indian currency. India seeks to protect politically sensitive sectors, particularly agriculture, while securing better tariff treatment for its exporters.

The United States, on the other hand, wants India to cut its Russian oil purchases, as it believes this helps finance the war in Ukraine. Talks between the two nations are expected to continue, with US Secretary of State Marco Rubio visiting India later in September and potential further discussions between Modi and Trump soon.