India-US Trade Deal Stalled, Section 301 Tariff Risks Loom
Negotiations on a trade deal between India and the United States have yet to reach a signature after months of discussions, with the Iran conflict occupying diplomatic focus and a US court ruling weakening the basis for reciprocal tariffs opening up new bargaining space. The first tranche, initially targeted for completion by mid-March, has been pushed back again, although an Indian trade delegation recently concluded a visit to the US without a final announcement.
The Indian government insists both sides are still working towards a "balanced, mutually beneficial, and forward-looking" agreement, taking into account their respective priorities. However, some analysts believe the delay could be costly, as the US administration is set to conclude its Section 301 investigation in June, shifting negotiating leverage to Washington.
Tariffs have become a sensitive issue following changes in the US policy landscape. Last year, the US imposed high tariffs of up to 50% on India, some of which were punitive, on Russian oil imports. In early February, the tariffs were reportedly lowered to 18% in exchange for India lowering tariffs on US goods to zero, shifting oil supplies from Russia to the US and Venezuela, and committing to purchase US$500 billion worth of US products.
The problem was that, following a US court ruling declaring Trump's reciprocal tariffs "illegal," the US administration then imposed a flat 10% tariff on all trading partners. This put India at risk of paying a higher price than other countries if it continued to accept the framework agreement drafted in February, prompting New Delhi to push its negotiators to pursue preferential access to the US market.
Timing, on the other hand, was a key factor. Former USTR official Mark Linscott argued that a deal needed to be "sealed" before the end of May to avoid India facing the risk of higher tariffs when the Section 301 process concluded. He argued that once the investigation was closed, the US would have more room to impose findings-based tariffs, while India would lose its first-mover advantage.
Energy further complicates the equation. The US is pressuring India to purchase more American energy as New Delhi seeks supply security amid Middle East disruptions, but the benefits are seen as limited for India due to high freight costs, incompatible refinery infrastructure, and longer delivery times. At the same time, India's dependence on Russian oil actually increased in March to nearly 50% of total imports, highlighting that a supply transition will not be easy in the short term.
For the market, the core risk is not simply the delay in the signing schedule, but the potential for a change in the tariff regime that shifts India's trade expectations toward the US. Variables to monitor include the timeline for the closure of the Section 301 investigation in June, the interim tariff position offered by Washington, and the preferential access negotiations New Delhi is pursuing amidst geopolitical and energy security dynamics. (gn)
Source: Newsmaker.id
