Why the India-US Trade Deal Is Still Not Signed: Tariffs, Court Rulings and Russian Oil
The US Secretary of State will visit India next week, his second visit this year, after first stopping in Uzbekistan on a six-day trip. Instead of New Delhi, the visit will focus on investment and energy in Mumbai (India's financial hub) and Jamnagar (Gujarat), home to the world's largest oil refining complex.
The main unfinished business is the India-US trade deal. In February 2026, both countries agreed a framework for an interim deal: the US would cut its reciprocal tariff on Indian goods from 25% to 18%, and India would cut duties on a range of US industrial and farm goods. It has still not been finalised and signed.
A key reason is legal uncertainty in the US. The tariffs that formed the base of the deal were imposed under an emergency law (IEEPA), which the US Supreme Court struck down in February 2026. Once that tariff system ended, the value of the US offer became unclear.
India is also cautious about new US trade measures, such as a US investigation into unfair trade practices in several countries, and a 2026 US law that allows tariffs of up to 100% on countries that buy Russian oil. On 16 October 2026, the US President signed an order waiving those threatened penalties.
The tone of talks has turned cautious: India's Finance Ministry said talks had reached a "plateau" with little room for more concessions, and the US Trade Representative said an announcement was not "imminent". The main sticking points are agriculture (India's farmers), US demands that India buy more US energy, and India's insistence that its final tariff be competitive with rivals like Vietnam. India's Commerce Ministry said the first tranche is in legal drafting and will be put into effect only once Indian exporters get an edge over peer countries.
Trade has held up: India's goods exports to the US rose 21% in August 2026 to $8.3 billion, compared with August 2025, when Indian goods faced 50% tariffs.
India-US Bilateral Trade Agreement (BTA)
The India-US Bilateral Trade Agreement (BTA) is a trade deal India and the United States are negotiating to make it cheaper and easier to sell goods and services to each other. It is being done in stages, called tranches, with an interim agreement as the first step. The US is India's biggest export market, so the tax the US puts on Indian goods directly affects Indian jobs in textiles, gems and jewellery, leather, shrimp and engineering goods.
The interim deal's 18% rate was agreed when the old IEEPA tariffs existed. With that base gone, India now wants a final tariff that keeps its exporters ahead of rivals like Vietnam, while the US wants more access for its farm goods and more energy purchases. These gaps explain why the deal has hit a "plateau" even though the legal text is being drafted.
International Emergency Economic Powers Act (IEEPA), 1977
IEEPA is a 1977 United States law that lets the US President control economic dealings with foreign countries after declaring a national emergency about an "unusual and extraordinary threat" from outside the US. It is the main legal tool behind most US sanctions, such as freezing a country's money in US banks. In 2025, the US used it for the first time to impose broad tariffs, including the "reciprocal tariffs" on India.
The February 2026 framework offered India a lower IEEPA-based reciprocal tariff in return for big Indian concessions. When the Supreme Court struck down those tariffs, the US offer lost its clear value, which is one of the main reasons the deal has not been signed.
Economic Sanctions: Primary vs Secondary Sanctions
Economic sanctions are penalties that one country or a group of countries puts on another to force a change in behaviour, using money and trade instead of weapons. Primary sanctions stop a country's own people and companies from dealing with the target. Secondary sanctions go further and punish third countries and their companies for dealing with the target. Because so much world trade runs through US banks and the US dollar, US secondary sanctions can reach almost the whole world.
India is one of the largest buyers of Russian crude, so the 100% tariff threat under the 2026 US law hung over the trade talks. The waiver signed on 16 October 2026 gives relief to Indian exporters and India's energy security, but because the law remains in force, the risk has not fully gone away.
- Interim deal framework: February 2026; US reciprocal tariff on India to fall from 25% to 18%
- US Supreme Court ruling against IEEPA tariffs: 20 February 2026, 6-3, Learning Resources, Inc. v. Trump
- 2026 US law allows up to 100% tariffs on top buyers of Russian oil or gas; waived on 16 October 2026
- India's goods exports to the US, August 2026: $8.3 billion, up 21% year on year (August 2025 tariffs on India: 50%)
- US ambassador in June 2026: negotiators working on the "last one percent" of the pact
- Main sticking points: agriculture, US energy purchases, India's tariff rate vs Vietnam and other rivals
- US Secretary of State's visit: Mumbai and Jamnagar; trip starts in Uzbekistan
- BTA launched: 13 February 2025; "Mission 500" = $500 billion trade by 2030