Kathmandu, Thu, 07 Aug 2025.
Why did US-India trade talks fail after five rounds?
How did America’s trade deals with other countries affect negotiations with India?
What proposals did India present?
Why did Trump back out at the last moment, and what are the future prospects?
Let’s take a closer look…
Tariff Shock from the US
US President Donald Trump’s decision to impose a 25% import tariff on Indian goods comes into effect from August 7 (as per US time). Despite five rounds of negotiations between Indian and US trade representatives, the Trump administration rejected India’s proposals to lower tariffs in several sectors. Instead, citing India’s ongoing trade with Russia, Trump announced an additional 25% tariff from August 27. This means that by the end of August, Indian exports to the US could face up to 50% total tariffs.
When Did India-US Trade Talks Begin?
Talks between India and the US over a bilateral trade agreement began in February—just a month after Trump took office. India prioritized striking a deal early and even announced its trade delegation. Despite five rounds of talks in five months, no agreement was reached.
During US Vice President JD Vance’s visit to India in April, both sides finalized a draft agreement. India offered to lift tariffs on US industrial exports, which account for 40% of US exports to India. India also agreed to reduce duties on US alcohol and automobiles. Moreover, India committed to increasing energy and defense purchases from the US by $25 billion to reduce the $45 billion trade deficit.
By the fifth round of negotiations, both sides appeared to be closing in on a breakthrough. Trump had even publicly mentioned an upcoming “big deal.” However, dissatisfaction within the US administration regarding India’s tariff concessions stalled progress. Indian officials, on the other hand, were keen to protect domestic agriculture and dairy sectors.
How Did US Deals with Other Countries Affect the India Talks?
According to Reuters, US negotiators began seeing better opportunities with countries like Vietnam, Indonesia, and Japan. As the US progressed with deals in Southeast Asia and finalized a major trade agreement with the European Union, it began putting more pressure on India to match concessions.
Indian negotiators, however, resisted US demands in critical sectors, citing national interest.
India’s Proposals During Negotiations
In the fifth round of talks, India asked the US to lift a 10% base tariff and also discussed the removal of tariffs on steel, aluminum, and the auto sector. But after Japan and the EU agreed to higher US tariffs without pushing back, Trump saw this as a strategic win and hardened his stance. India, too, tried to settle at a 15% tariff level like other nations but to no avail.
Why Did Trump Back Out at the Last Minute?
According to White House officials, Trump, emboldened by favorable deals with other countries, pushed for maximum market access, low tariffs, and high investment as part of his “America First” narrative.
Additionally, tensions between India and Pakistan in May further complicated matters. Trump attempted to mediate the conflict and claimed credit for a ceasefire—claims repeatedly denied by India. These tensions negatively impacted the trade atmosphere and stalled the agreement further.
What Lies Ahead for India-US Trade Relations?
The new US tariffs on Indian goods took effect on August 7, with an additional 25% duty on Russian oil-linked imports starting August 27. However, both sides are expected to resume talks in mid-August.
The US delegation is expected to return with new conditions. India may offer limited concessions in the agriculture and dairy sectors and could negotiate increased energy purchases from the US to counterbalance Russian imports.
According to former US trade representative Mark Linscott, “The two countries were once very close to a deal. It’s not too late. With direct communication between both heads of state, the issue could still be resolved.”
