India has decided to hold off on signing a trade deal with the United States for several months, sources with direct knowledge of the matter told Reuters, citing a new investigation by Washington into what it calls excess industrial capacity among trading partners, including India.
Originally, New Delhi had expected to sign an interim deal in March, followed by a full agreement later. The early understanding, reached in February, would have cut U.S. tariffs on Indian imports in exchange for commitments including halting Russian oil purchases, lowering duties on U.S. goods, and buying $500 billion of American products.
However, sources said the timeline could now slip by several months. U.S. officials, while urging patience, have expressed confidence that India will honor its commitments. A spokesperson for India’s trade ministry denied any pause in engagement, emphasizing that both sides remain actively engaged for a mutually beneficial trade agreement.
Complications From Tariffs and Investigation
Negotiations have lost momentum since the U.S. Supreme Court struck down Trump-era tariffs in late February, and the White House has been preoccupied with the war on Iran. India has only partially curtailed Russian oil imports, while U.S. officials are pressing for increased purchases to ease global energy shortages caused by the conflict.
Complicating matters further is a new U.S. investigation under Section 301 of the Trade Act of 1974, examining structural excess capacity in manufacturing across 16 trading partners, including India. One Indian source described it as a pressure tactic to accelerate deal-making, saying New Delhi will take a “wait and watch” approach before responding or pursuing options such as the World Trade Organization.
U.S. Expects Commitments Honored
U.S. Ambassador to India, Sergio Gor, reiterated that Washington expects countries with prior agreements to honor their commitments. He stressed that the trade arrangements remain mutually beneficial, noting that multiple U.S. tools exist to enforce tariffs if necessary.
Meanwhile, India seeks clarity on whether the U.S. will revert to previously agreed tariff levels of 18% or maintain a different rate under the new investigation, prompting the cautious approach. “If you are at 10% tariff and these investigations are going through, it is better to hold out and see what they come up with, rather than proactively sign an agreement,” said Priyanka Kishore, a Singapore-based trade consultant.
