India-US Trade Deal: First Phase Close, but New US Tariffs Keep Talks Going
The Ministry of Commerce and Industry said India is close to finalising a trade deal with the United States and expects it to be among the best deals the US has signed, with preferred market access for products that matter to India.
India and the US finalised the framework for the first phase of their Bilateral Trade Agreement (BTA) in February 2026.
Since then, changes in US tariffs have needed more talks. From 24 July 2026, the US has charged an extra 10% import duty on goods from India and many other countries, after an investigation under Section 301 of the US Trade Act of 1974 about forced labour. This duty is added on top of normal MFN (most-favoured-nation) rates.
A two-member US team visited India in early November 2026 for talks on trade and customs facilitation (making customs checks faster and simpler).
India wants lower US tariffs than its export rivals such as Bangladesh, Vietnam and Cambodia. No date has been fixed for signing; the ministry said several factors will decide the outcome.
India-US Bilateral Trade Agreement (BTA)
The India-US Bilateral Trade Agreement (BTA) is a trade deal that India and the United States are negotiating with each other. Its aim is to make it cheaper and easier for each country to sell goods and services to the other, by cutting import taxes (tariffs) and removing other barriers. The talks were launched in February 2025, with a goal of raising total trade between the two countries to US$500 billion by 2030 ("Mission 500"). The deal is being done in phases ("tranches"), starting with a first, smaller phase.
The February 2026 framework was built around tariff rates that the Supreme Court ruling and the later Section 301 duties have since changed. That is why the two sides are negotiating again, and why India now wants clear preferential rates compared with competitors.
Section 301 of the US Trade Act, 1974
Section 301 is a part of the United States' Trade Act of 1974. It lets the US government investigate another country's trade practices and punish it with tariffs or other limits if it decides those practices are unfair or harmful to US businesses. The Office of the United States Trade Representative (USTR) runs these investigations. Unlike emergency tariffs, Section 301 action follows a process of investigation, public comment and a formal decision, which makes it harder to challenge in US courts.
The "recent changes in US tariffs" that reopened the India-US talks are mainly these Section 301 forced-labour duties. India wants the trade deal to give it lower overall tariffs than rivals that face the same or higher Section 301 duties.
The Most-Favoured-Nation (MFN) Principle
The Most-Favoured-Nation (MFN) principle is the basic rule of world trade: do not discriminate between your trading partners. If a World Trade Organization (WTO) member gives a lower import tax to one country, it must give the same lower tax to the same product from all other WTO members. The name is confusing: it does not mean special favour for one country, it means equal treatment for all. The "MFN rate" is simply a country's normal, standard tariff for all WTO members.
The extra 10% Section 301 duty is added to the US MFN tariff on Indian goods. A trade deal is India's way to get rates below MFN for its key products, and below what Bangladesh, Vietnam and Cambodia pay, which only a free-trade-type deal under the WTO exceptions can allow.
- India-US BTA talks launched February 2025; target of US$500 billion bilateral trade by 2030
- Framework for the first phase (interim agreement) finalised February 2026; planned US tariff on Indian goods: 18% (down from 50%)
- US Supreme Court struck down IEEPA tariffs on 20 February 2026 (6 to 3)
- Temporary Section 122 tariff: 10%, maximum 150 days
- Section 301 forced-labour duties: from 24 July 2026; 60 economies; tiers of 10% and 12.5%; India in the 10% tier
- About 45% of India's exports to the US estimated to be exempt from the extra duty (Government of India estimate)
- India seeks lower US tariffs than Bangladesh, Vietnam and Cambodia
- MFN: GATT Article I (goods), GATS Article II (services); FTA exception under GATT Article XXIV