India Delays Trade Deal With US Amid New Investigation by Washington

India has decided to postpone for several months the conclusion of a trade agreement with the United States, the Indian newspaper The Economic Times reported.

Photo: Press Information Bureau on behalf of Prime Minister's Office, Government of India by www.pmindia.gov.in

Narendra Modi

The reason was a new investigation launched by the administration of President Donald Trump under Section 301 of the Trade Act of 1974.

Washington is examining how effectively US trading partners combat imports of goods produced using forced labor.

Indian authorities prefer to wait for the results of this investigation and assess the possible consequences for their economy before signing the final document.

This comes despite the fact that in February both countries announced the completion of work on the first part of the agreement and planned to formalize it legally already in March.

Negotiations Intensified After Modi's Visit

It should be noted that negotiations on a trade agreement between the two countries intensified after the visit of Prime Minister Narendra Modi to Washington in February 2025.

The goals that were announced were quite ambitious. In particular, the plan was to increase trade turnover between the two countries to $500 billion by 2030.

Over the past year the sides actively held negotiations at the level of ministers and trade representatives, although it cannot be said that they proceeded smoothly.

Tariffs as a Tool of Pressure

The US president actively used tariffs as a lever of pressure. For example, on April 2, 2025, Donald Trump announced the introduction of 25 percent tariffs on Indian goods. However, a week later he introduced a 90-day moratorium, and negotiations continued.

This is a favorite method of the US president in negotiations over trade agreements — to conclude deals, as he himself puts it. And it affected not only India.

Washington also used tariffs to pressure New Delhi to abandon purchases of Russian oil. In July and August of last year the United States introduced additional 25-percent tariffs against India, bringing the total rate to 50 percent. This was directly linked to India's purchases of Russian oil.

Framework Agreement in 2026

The culmination of the first stage came on February 2, 2026, when Donald Trump announced the achievement of a framework agreement under which the United States reduced tariffs for India from 25 percent to 18 percent.

In return, India pledged to eliminate tariffs on a number of American goods and increase purchases of US energy resources and other products by $500 billion.

Trump also stated that Narendra Modi had promised to stop buying Russian oil, although the Indian side soon disavowed this statement, reaffirming its commitment to strategic autonomy.

Negotiations Stall Again

At present it can be stated that the negotiations have stalled once again.

On February 20 the Supreme Court of the United States ruled illegal the introduction of import tariffs by the president under the pretext of the International Emergency Economic Powers Act.

After that Donald Trump signed an order introducing a uniform 10 percent tariff on imports from all countries and then stated his intention to raise it to 15 percent. The ten-percent tariff entered into force on February 24 and will remain in effect for 150 days, until July 24.

Meanwhile, India decided to postpone the visit of its delegation to Washington that had been planned to sign the final document.

The US investigation mentioned above may well be regarded in New Delhi as an additional instrument of pressure aimed at forcing the country to fulfill previously assumed obligations despite changes in the legal environment.

For this reason the Indian authorities may have decided to slow the process until the situation becomes clearer.

Government Denies Reports of Suspension

However, the Ministry of Commerce and Industry of India later denied media reports about the suspension of negotiations with the United States on the trade agreement.

The ministry assured that negotiations on a mutually beneficial trade agreement are continuing.