Why are the India US trade negotiations deadlocked

Recently, Indian Finance Minister Sitharaman publicly stated that trade negotiations between India and the United States have entered a "bottleneck period", and it is "difficult for both sides to make greater concessions or compromises", indicating that the two countries are facing insurmountable obstacles on the road to reaching this key agreement.

The India US trade negotiations began during Indian Prime Minister Modi's visit to the United States in February 2025. The two countries pledged to initiate negotiations around a bilateral trade agreement and set a goal of expanding bilateral trade to $500 billion by 2030. Subsequently, tariffs and market access became the main topics of negotiation. In February 2026, after multiple rounds of negotiations, significant progress was made in the talks, and the leaders of the two countries announced through a direct phone call that a "temporary trade agreement" had been reached. The United States announced that it will lower the so-called "equivalent tariff" rate on Indian goods imported to the United States to 18% and cancel the previously increased 25% tariff on Indian purchases of Russian oil; India agreed to expand its procurement of goods such as energy, aircraft, and technology products from the United States. This' temporary trade agreement 'is seen as an important signal of the recovery of bilateral relations.

However, the "temporary trade agreement" did not resolve all the differences between the two sides, especially in sensitive areas such as agricultural products. Since then, trade representatives from both sides have conducted multiple rounds of negotiations on key issues, but the two sides have not made any substantial breakthroughs on core issues for more than six months. Indian Minister of Commerce and Industry Goyal went to the United States at the end of September to attend the G20 Trade Ministers' Meeting and held talks with US trade negotiator Greer, but the talks failed to push the negotiations to a resolution and only confirmed a list of "unresolved issues".

Sitharaman commented on the current stalemate in the India US trade negotiations, stating that "both concessions and demands will be 'very, very difficult'" and admitting that "the room for maneuver is very limited". Greer said that the trade agreement has entered its final stage, but it is not "about to be reached". Both sides have identified a series of "divergent issues", but it seems that none of them can meet each other's demands, and it is difficult to seek common ground while reserving differences and putting aside differences. The deadlock in negotiations has increased the uncertainty of India's economic prospects, while continuing to consume the market's optimistic expectations for India's economic growth. Goldman Sachs Group raised its economic growth forecast for India to 6.9% at the beginning of this year due to the temporary trade agreement reached between India and the United States, but with the negotiations deadlocked, its latest forecast has fallen back to 5.9%.

Overall, the interweaving of the "four factors" has led to a deadlock in the India US trade negotiations.

One is the structural divergence between agricultural products and market access. The main differences between the two sides are concentrated in the fields of agriculture and market access. The United States hopes that India will reduce tariffs on agricultural and dairy products, and further open up its market; India is concerned that a large influx of American agricultural products may impact its own agriculture. Market access for agricultural products is an important and sensitive issue for India in trade negotiations, which involves the livelihoods of hundreds of millions of Indian farmers and has extremely limited room for political compromise. Meanwhile, according to official data released by the United States, in the first half of 2026, the US trade deficit with India in goods will be approximately $22.4 billion. Although it has narrowed compared to the same period last year, there is still significant pressure from the US to require India to open its market through agreements in order to narrow the deficit.

Secondly, the United States continues to pressure India over the Russian oil issue. In September of this year, US President Trump signed the "2026 Graham Sanctions Against Russia and Iran Act", which comprehensively strengthens sanctions against Russia, extends sanctions against Iran, and specifies that up to 100% of so-called "secondary tariffs" can be imposed on third countries that import Russian oil or natural gas. India is an important importer of Russian energy, with approximately one-third of its imported crude oil coming from Russia in the 2026 fiscal year. The Indian government criticized the bill as "potentially damaging bilateral relations between India and the United States" and warned that such punitive tariffs would disrupt the global energy market. This move by the United States has put India in a dilemma of energy policy and further narrowed the space for trade negotiations between India and the United States.

Thirdly, the US' 301 investigation 'has become a new' stumbling block '. In the first half of 2026, the United States launched a "301 investigation" on 16 economies including India, citing "overcapacity", involving industries such as petrochemicals, textiles, and solar panels. Subsequently, India officially refuted the US accusation of "structural overcapacity" in the relevant industries, stating that the US lacked concrete evidence and demanded that the Office of the United States Trade Representative (USTR) terminate the investigation. The investigation is still ongoing, and the final ruling is expected to be completed by March 2027. In July, the Office of the United States Trade Representative issued final measures based on the results of the "301 investigation" on "not prohibiting the import of forced labor products", imposing 301 tariffs on 60 economies including India. The United States has threatened to pressure India to make concessions and compromises in trade negotiations through the "301 investigation" under the pretext of "overcapacity" and "forced labor". This behavior of waving the "tariff stick" will only make India more resentful towards the United States.

Fourthly, the foundation of mutual trust between India and the United States is constantly being eroded. Since the beginning of this year, a series of events have had an impact on the relationship between the two countries. On June 8th and 9th, the US military launched consecutive attacks on two oil tankers carrying Indian crew members in the Gulf of Oman, resulting in the death of three Indian crew members. The attack triggered strong protests in India and also sparked strong anti American sentiment within the country. On October 8th, the United States further tightened its immigration policies and suspended the eligibility of companies, including several Indian IT giants, to participate in the "Green Card Program". Due to nearly three-quarters of H-1B visa applicants coming from India, this move has a direct impact on the Indian technology industry. On October 9th, US Vice President Vance referred to Indian technical workers holding H-1B visas as "contract workers", and the Indian Ministry of Foreign Affairs expressed "deep dissatisfaction" with this, calling his remarks "colonialist and offensive".

Faced with the deadlock in negotiations, India is preparing with both hands. On the one hand, India still hopes for a breakthrough in the upcoming negotiations. In the fourth quarter of this year, high-level interactions between India and the United States may be close, and the Indian side hopes to inject new momentum into the negotiations. However, given that the gap in positions between the two sides on core issues is difficult to bridge in the short term, there are doubts in the market about whether high-level diplomacy can be transformed into substantive breakthroughs. On the other hand, India is accelerating its efforts to diversify its trade layout, hoping to alleviate the impact of US tariffs and negotiation pressure by signing trade agreements with other countries. In recent years, India has successively reached or promoted free trade agreements with economies such as the United Kingdom, Oman, New Zealand, and the European Union. It is also advancing trade negotiations with countries and regions such as Israel, the Gulf Cooperation Council, Australia, Peru, and Chile to expand export markets and reduce dependence on the United States.

Market analysts believe that in the context of the core disagreement on agricultural market access being difficult to bridge and geopolitical factors continuing to erode bilateral mutual trust, coupled with political variables such as the upcoming November US midterm elections, the pace of India US trade negotiations may be further delayed. The market is not optimistic about achieving a breakthrough in negotiations and reaching a comprehensive trade agreement between India and the United States in the short term, and the trade relationship between India and the United States may continue to be in a state of "deadlock".