NEW DELHI: In the wake of what is termed an unexpected stall in what was once a promising India–US trade agreement, the Government of India has issued a measured response, acknowledging recent remarks by the US President and reaffirming its commitment to securing India’s economic interests.
“The Government has taken note of a statement by the US President on bilateral trade. The Government is studying its implications,” the Ministry of Commerce and Industry said in a statement.
“India and the US have been engaged in negotiations on concluding a fair, balanced, and mutually beneficial bilateral trade agreement over the last few months. We remain committed to that objective.
The Government attaches the utmost importance to protecting and promoting the welfare of our farmers, entrepreneurs, and MSMEs. The Government will take all steps necessary to secure our national interest, as has been the case with other trade agreements, including the latest Comprehensive Economic and Trade Agreement with the UK.”
The unravelling of the trade deal has come as a surprise to many, particularly given the momentum seen in bilateral discussions earlier this year. Experts point to a confluence of strategic, economic, and political factors that allegedly led to the impasse.
Nisha Biswal, Partner at the Asia Group and former US Assistant Secretary of State for South and Central Asia, noted that the breakdown was “less about substance and more about tactics.”
“The US is using hardball tactics when there is an ambitious deal already on the table, which risks jeopardising all the substantial progress made in bilateral talks,” Biswal said. “President Trump wanted to retain a minimum 20% baseline tariff on India—this was a non-starter for New Delhi.”
She added that US demands for wider access to Indian agricultural and dairy markets pushed up against domestic sensitivities in India. Moreover, Trump reportedly wanted to bypass formal negotiating channels and deal directly with Prime Minister Modi—a move India resisted to preserve the integrity of talks conducted via the US Trade Representative (USTR).
“Trump is exerting maximum pressure on India to get Modi’s attention,” said Biswal. “Modi may want to examine what Japan, the EU, and China did when they faced similar pressure: keep calm, retaliate if you must, but always keep the channel open. The real tragedy would be if both sides walk away from a big win.”
According to Indo–US trade expert Basant S. Sanghera, the failure to clinch a final deal was disappointing but not entirely unexpected. He outlined three major factors behind the collapse: first, India proposed a reciprocal tariff in the 13–15% range, aligning with rates negotiated by countries like Japan and Vietnam.
However, the US allegedly insisted on a 20% baseline, which India found unfeasible as it seeks to attract global manufacturers and offer competitive trade terms. Second, the US demand for more access to India's agriculture and dairy sectors was met with some concessions, but not to the extent Washington wanted.
These sectors remain politically sensitive in India. And third, with national elections on the horizon and growing economic nationalism, Prime Minister Modi had limited leeway to offer deeper concessions. Any perception of yielding too much could be politically damaging.
Sanghera emphasised that while the missed deadline of 1 August is a setback, the broader Bilateral Trade Agreement (BTA) is still in motion. “Negotiations are continuing, and a USTR team is expected in New Delhi in August. There is still room to reach a breakthrough, possibly timed with the Quad Leaders’ Summit this autumn,” he said.
He suggested that early progress in parallel strategic areas could help cushion the relationship and maintain momentum. These include finalising the 10-year US–India Major Defense Partnership Framework, progressing on India’s nuclear liability reforms, and formally launching the Transforming the Relationship Utilizing Strategic Technology (TRUST) initiative.
While the setback is significant, experts caution against reading it as a sign of deteriorating India–US ties. Rather, it reflects the complex, transactional nature of trade diplomacy under the current US administration. Both governments continue to value the strategic partnership, and the foundation remains strong.
However, failure to reach an agreement could have economic consequences for both sides—especially for US businesses hoping to expand in India and for New Delhi’s ambition to position itself as a manufacturing alternative to China.