The India-US bilateral trade agreement: A deal on hold

• India has placed its bilateral trade agreement (BTA) with the United States on hold despite reports that 99% of the deal was finalized earlier this year.
• The impasse stems from conflicting domestic economic policies, U.S. judicial rulings, and new U.S. investigations into Indian trade practices.

Background

• Launched in early 2025, "Mission 500" aimed to double bilateral trade to $500 billion by 2030.
• Negotiations were heavily influenced by President Trump’s "America First" agenda, which prioritized U.S. worker and farmer access while targeting India’s trade surplus and high tariffs.
• An early February framework was criticized as lopsided; it required India to lower tariffs on U.S. industrial and agricultural goods while allowing the U.S. to impose reciprocal tariffs up to 18%.
• India also committed to ending Russian oil imports in exchange for the removal of 25% duties on Indian goods.

Recent Disruptions

• Judicial Intervention: The U.S. Supreme Court ruled that President Trump lacked the authority to impose "reciprocal tariffs" under the International Emergency Economic Powers Act (IEEPA), undermining the administration's leverage.
• New Investigations: The USTR initiated investigations under Section 301 of the Trade Act of 1974:
  • Forced Labor: India is among 54 nations facing potential 10% duties over enforcement of forced labor import prohibitions.
  • Manufacturing Capacity: Seven Indian sectors, including construction goods, are under scrutiny for "structural excess capacity."

Implications

• Commerce Minister Piyush Goyal stated the deal remains on hold unless the U.S. offers competitive advantages comparable to those granted to neighboring countries like Vietnam and Thailand.
• India is concerned that the U.S. might leverage unilateral measures like Section 301 even after trade concessions are finalized, creating an unpredictable business environment.