India is likely to postpone signing a trade agreement with the United States for several months, news agency Reuters reported, as new investigations launched by Donald Trump administration into industrial capacity among trading partners have introduced fresh uncertainty into the negotiations.
New Delhi had earlier hoped to finalise an interim trade arrangement in March, with plans for a broader agreement later. The expectation followed discussions in early February in which the US agreed to reduce steep tariffs on Indian imports in exchange for several commitments, including lowering duties on American goods, increasing purchases from the US and curbing imports of Russian crude oil.
Timeline Slips as Talks Lose Momentum
However, officials familiar with the matter indicated that the timeline for signing the agreement could now be pushed back by several months, as per Reuters report.
India’s trade ministry rejected suggestions that engagement had stalled. A ministry spokesperson said both countries remain in contact and continue to work towards a mutually beneficial trade agreement, though no details were shared regarding the formal signing timeline.
A White House official also said the United States is continuing discussions with India to finalise the agreement.
New US Probe Adds Pressure
According to Indian officials, negotiations slowed after the Supreme Court of the United States struck down Trump-era tariffs in late February, and there have been few substantive discussions since then. Washington has also been preoccupied with the ongoing conflict involving Iran, which has affected global energy markets.
India, meanwhile, has increased the purchase of Russian oil to meet crude oil demand at home. US officials have also reportedly encouraged New Delhi to step up energy imports from other sources to help ease supply disruptions triggered by the conflict.
Complicating matters further is a new investigation launched by the US into what it describes as structural excess capacity in manufacturing sectors across 16 trading partners, including India. The probe has been initiated under Section 301 of the U.S. Trade Act of 1974.
“We are not in a hurry to sign any deal,” said one of the sources, according to Reuters. “The new investigation is a pressure tactic to force countries into signing deals after the court order. It’s a spanner in the works.”
The report added that India is adopting a cautious “wait and watch” approach as US tariff policies evolve. Earlier, tariffs on Indian exports had reached as high as 50%, among the steepest globally, before the US administration reduced them to 25% after discussions with New Delhi.
If permitted, India plans to present its position before the Office of the United States Trade Representative or wait for the outcome of the investigation before deciding its next steps, which could include approaching the World Trade Organization.
US Expects India to Honour Commitments
US Ambassador to India Sergio Gor said Washington still expects New Delhi to follow through on commitments made during earlier discussions.
“So we fully expect the nations that we’ve made deals with to honour those deals,” he said at an event organised by India Today Group.
“I think India will do that because … it’s not just about honouring it – it’s a win-win situation.”
Following the Supreme Court ruling, the US imposed a 10% tariff on imports from all countries until July 24. Under the earlier framework for an interim agreement, India’s exports to the US were expected to face duties of about 18%.
New Delhi is now seeking clarification on whether that tariff level will apply or whether Washington may introduce a different rate going forward.
“It makes sense for India to slow down on trade talks,” said Priyanka Kishore of Singapore-based consultancy Asia Decoded. “If you are at 10% tariff and these investigations are going through, it is better to hold out and see what they come up with, rather than proactively sign an agreement.”