The drastic changes in tariff policies have caused unrest in the Middle East, and India and the United States have restarted trade negotiations
The bilateral trade negotiations between the United States and India resumed on April 20th in Washington, D.C., after being put on hold for sveral months. The three-day meeting of chief negotiators is taking place against the backdrop of a "fundamental shift" in US tariff policy - after the Supreme Court overturned equivalent tariffs, the US imposed a temporary 10% tariff on a global scale, leading to the collapse of the foundation of the agreement framework draft reached by both sides in February this year. The outcome of this negotiation will directly affect the direction of trade relations between the two countries and add new variables to India's positioning in the global supply chain restructuring.
Is the sudden change in US tariffs causing India's previous efforts to be in vain?
The core driving force behind this negotiation is the policy turn brought about by domestic legal rulings in the United States. According to a report by The Times of India on the 19th, in February of this year, the US Supreme Court ruled that the equivalent tariffs imposed under the International Emergency Economic Powers Act were invalid. The White House subsequently announced a temporary 10% tariff on all trading partners for a period of 150 days. This change completely overturned the previous arrangement between the United States and India - India had promised to reduce Russian oil imports in exchange for the "preferential treatment" of the United States by lowering tariffs from 50% to 18%, and on this basis, released a framework draft including agricultural product tariff reductions and a five-year energy procurement plan on February 7th.
However, the unified 10% tariff significantly dilutes India's "exclusive advantage" as all competitors face the same tax rate. On the 19th, the Indian "Federation" website quoted a government source as saying, "As the agreement has not yet been signed, we can choose to immediately change the content that needs to be changed." This means that India's previously designed concession plan in exchange for special treatment needs to be comprehensively reassessed. Indian negotiators believe that the balance of advantages in the early drafts no longer exists, and the agreement must be "recalibrated and redrafted".
According to the Fortune India website on the 19th, this round of negotiations will re-examine the framework draft released in February and examine its applicability in the revised tariff environment. The temporary tariff window period of 150 days has become a key time limit for the game between the two sides. Qian Feng, a researcher at the National Institute for Strategic Studies at Tsinghua University, pointed out that India needs to quickly lock in long-term rules during the window period, otherwise it will face greater export uncertainty.
Structural contradictions in trade have surfaced
Beyond the numerical game of tariffs, deeper trade structural issues have become a negotiating difficulty. According to the Indian Express, the US Trade Representative has launched two investigations into India under Section 301 of the Trade Act, focusing on digital service tax, intellectual property protection, and industrial subsidy policies. The US believes that India has engaged in practices that harm US commercial interests. India firmly demands the withdrawal of the investigation, citing the lack of sufficient basis for the allegations and the failure to provide substantive reasons for the initiation notice. Qian Feng stated that this disagreement is not only a technical dispute, but also reflects the deep game between the two sides in terms of the power to formulate rules in the digital economy era.
At the same time, the US has linked the issue of trade deficit to the narrative of "overcapacity". The US Trade Representative stated earlier this month that India's trade deficit with the US amounts to billions of dollars, and named India's solar panel manufacturing industry as having "production capacity almost three times the annual domestic demand," while accusing India's petrochemical, steel and other industries of similar problems. This characterization provides new evidence for the US to demand deeper industrial policy adjustments from India.
According to the website of India Today Business, US Trade Representative Jamison Greer made it clear during a congressional hearing that tariff barriers remain a key priority in the US India trade negotiations. Qian Feng analyzed that it can be foreseen that defining and resolving issues such as overcapacity, industrial subsidies, and digital service taxes will become one of the most technical and intense areas of negotiation.
In addition, India's protective stance in the agricultural and dairy markets remains firm. According to the Indian magazine "Free Media", India has refused to open up these sensitive sectors to avoid impacting local farmers and small and medium-sized enterprises, while the United States has demanded that India reduce tariffs on agricultural and industrial products. At present, there is no sign of a breakthrough in the stalemate between the two sides in this field.
Does the Middle East conflict make India unable to wait?
As the United States and India engage in negotiating table games, the macroeconomic and trade landscape of the two countries is also undergoing changes. According to the latest trade data cited by the Fortune India website on the 19th, China will surpass the United States to become India's largest trading partner in the 2025-2026 fiscal year, while the United States has maintained this position for four consecutive years. During the same period, India's exports to the United States only increased slightly by 0.92% to $87.3 billion, while India's imports from the United States increased by 15.95% to $52.9 billion, and its trade surplus with the United States narrowed from $40.89 billion to $34.4 billion.
On the other hand, geopolitical tensions in the Middle East have impacted India's trade data. According to a report by New Delhi Television in India, India's exports to West Asian countries plummeted by 57.95% year-on-year in March 2026, and imports also plummeted by 51.6%, exacerbating uncertainty in India's manufacturing industry and energy supply chain. The Nihon Keizai Shimbun reported that the natural gas shortage across India has led to the large-scale shutdown of factories, hundreds of thousands of Indian migrant workers returning home, and the production of automobiles and textiles has been particularly affected. In this context, ensuring trade stability in the US market is extremely urgent for the Indian manufacturing industry.
According to Qian Feng's analysis, based on comprehensive information from all parties, the most likely outcome of the trade negotiations between the United States and India in the short term is to sign a temporary agreement: the US will stabilize tariffs on Indian goods at around 18%, and India will gradually open up some agricultural and industrial markets, increase procurement of US energy and agricultural products in exchange for concessions. Sensitive issues such as comprehensive opening up of agriculture and digital taxes will be postponed, and the agreement may include flexible clauses allowing for dynamic adjustments. In the medium to long term, the strategic needs of the US' Indo Pacific strategy for India will constrain its adoption of an overly tough stance on trade issues with India, leaving room for maneuver in order to ultimately reach a comprehensive agreement.