India–US Trade Deal Awaits Tariff Architecture Completion: Report

India’s proposed trade agreement with the United States will be signed once Washington finalises its new global tariff framework, according to Commerce Secretary Rajesh Agrawal.

India began negotiations for a bilateral trade agreement (BTA) with the US on 13 February 2025, under the leadership of US President Donald Trump and Prime Minister Narendra Modi.

The deal was initially expected to be signed earlier this year, but its finalisation now depends on the tariff structure currently being redesigned by the US government.

Why Has The Trade Deal Been Delayed?

This is after the Supreme Court of the United States ruled against tariff measures that were proposed under the International Emergency Economic Powers Act (IEEPA).

As a result, the US is rebuilding its tariff framework. According to Agrawal, a global tariff rate of around 10% currently applies under Article 122, but the US is working to establish a broader and more permanent tariff architecture.

India prefers to finalise the trade agreement once this revised tariff system is in place, ensuring the deal aligns with the new global structure.

Under the interim trade arrangement reached earlier this year, the US reduced tariffs on Indian goods from 25% to 18%. The US also removed an additional 25% tariff imposed earlier due to India’s purchases of Russian oil.

Following the judicial ruling, the US shifted to a 10% universal tariff system, still maintaining section-specific tariffs under the Trade Expansion Act, Section 232.

These levies apply to products such as steel, aluminium, automobiles, copper, and lumber, often justified on national security grounds.

Trump has also indicated that new tariffs may be introduced through alternative legal mechanisms following the court’s ruling.

What New Trade Risks Are Emerging?

The Office of the US Trade Representative has launched an “unfair trade practices” investigation into excess industrial capacity among 16 economies. This includes India, China, the European Union, Japan, South Korea, and Mexico. The probe could lead to additional tariffs as early as this summer, depending on its findings.

India’s trade flows are also being affected by the conflict in the Middle East. Officials said air cargo operations and shipping routes have been disrupted, potentially affecting both exports and imports. March is expected to be a challenging month for trade, particularly for exporters shipping goods to West Asia.

The government is deliberating on support measures for the exporters, and further announcements are yet to be made.

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What Does This Mean For Investors?

To investors, the postponement of the India-US trade agreement shows that changes in policies and tariffs can have a direct effect on the visibility of global trade. In the short term, export-based industries like information technology (IT) services, pharmaceuticals, automobile parts, and manufacturing might still be vulnerable to the policies on US tariffs.

Meanwhile, a certainty regarding a new tariff structure might serve as a primary stimulus in terms of trade flows and corporate profits, particularly for companies with high involvement in the US market.

In the near term, markets can still see some volatility due to geopolitical moves and policy shifts. But if a trade deal gets finalised, it can open up better market access, reduce tariff-related risks, and support long-term growth for India-linked exporters.

Sources:

Economic Times

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