The proposed bilateral trade agreement between India and the United States is no longer just about tariff reductions. It has now become closely linked to agricultural safeguards, future US tariff policies, market access, and India’s long-term economic strategy. Despite months of negotiations and repeated claims by both sides that they are close to a deal, no final agreement has been reached.
India has maintained that the agreement must be balanced, commercially meaningful, and deliver tangible benefits to businesses, farmers, workers, and consumers in both countries. New Delhi also appears unwilling to compromise on its key economic and political priorities simply to secure immediate tariff relief.
Let us understand the reasons behind the delay in the India-US trade deal and what this evolving situation could mean for investors and the Indian economy.
What’s Happening?
India and the United States are trying to finalise an interim trade pact. During US Trade Representative Jamieson Greer’s visit to New Delhi in June 2026, expectations were high that both sides would conclude a limited agreement. However, the discussions ended without a final outcome.
According to reports, India is seeking two key assurances. First, Indian products should enjoy a clear tariff advantage in the US market over competing exports from countries such as Vietnam, Thailand, the Philippines, Indonesia, Malaysia, China, Bangladesh, and Sri Lanka. Second, the US should refrain from imposing fresh tariffs on India after the agreement is signed. Without these assurances, India has chosen to wait for better terms instead of rushing into a deal.
Union Commerce and Industry Minister Piyush Goyal has dismissed negative reports surrounding the negotiations, stating that both countries remain committed to a balanced agreement that delivers meaningful benefits to both sides. At the same time, India has made it clear that it will not accept unfavourable terms in sensitive sectors such as agriculture.
Legal Uncertainty Around US Tariffs Has Changed the Situation
Initially, there was greater pressure on India to conclude the agreement quickly. India was facing an effective 50% tariff structure, comprising 25% reciprocal tariffs and an additional 25% punitive tariff linked to oil imports from Russia.
A bilateral understanding reached on February 2, 2026, removed the oil-related penalty, reducing India’s tariff exposure to 18%. Subsequently, on February 20, the US Supreme Court struck down the broad executive tariff framework. In a 6-3 ruling, the court held that the administration had exceeded its authority by using the International Emergency Economic Powers Act to impose wide-ranging import duties without congressional approval.
Following the ruling, the US introduced a temporary 10% global fallback tariff. This created uncertainty around the long-term stability of US trade policy and gave India greater leverage and more time in the negotiations. From India’s perspective, offering permanent concessions under an arrangement where US tariff policies themselves remain legally and politically uncertain would be a risky proposition.
Strength From a Strong Economy and New Trade Partners
India’s firm negotiating stance is not based solely on the US court ruling. Despite disruptions caused by the Iran conflict during the April-June period, India’s merchandise exports grew by around 15% YoY. Exports to Gulf countries recovered to pre-conflict levels through alternative shipping routes, while shipments to the US also recorded growth during April and May.
At the same time, India is expanding its trade relationships with other major markets. The Free Trade Agreement (FTA) with the UK is expected to be implemented in July 2026, while an agreement with the European Union is anticipated by early next year. These developments are gradually reducing India’s dependence on any single export market.
Goldman Sachs has also revised India’s 2026 growth forecast upward to 6.8%. A relatively weaker rupee has further improved the competitiveness of Indian exports. Together, these factors have given India the confidence to wait for more favourable terms rather than accept a trade deal that may not serve its long-term interests.
What Does This Mean for Investors?
The delay in the trade agreement could keep near-term uncertainty elevated for export-oriented businesses. Any possibility of additional US tariffs could affect the cost competitiveness of sectors such as textiles, engineering goods, and other industries with significant exposure to the US market.
On the other hand, rushing into an agreement could create long-term challenges for agriculture, small businesses, and other sensitive domestic sectors. If India succeeds in securing permanent tariff advantages for its exports while protecting itself from future US tariff actions, businesses could benefit from greater policy certainty over the long term.
For investors, the key takeaway is that the government appears focused on building a sustainable and predictable trade framework rather than pursuing short-term gains. Meanwhile, greater access to markets such as the UK and the European Union could create fresh opportunities for export diversification across several sectors.
What’s Next?
The United States continues to be India’s largest export market. Between 2020 and 2025, India’s average annual goods trade surplus with the US stood at around $42 billion, compared with a combined surplus of approximately $12 billion with the European Union, the UK, and Japan. This underlines the strategic importance of the US market for India’s export economy.
Meanwhile, on July 13, 2026, Commerce Secretary Rajesh Agrawal stated that negotiations on the India-US trade agreement are progressing well and that the government does not foresee any major hurdles in concluding the deal successfully. He also indicated that the framework of the agreement is largely ready and will be signed at an appropriate time.
If the agreement is finalised in the coming months, it could provide fresh momentum to India’s exports, investments, and several key industries, with positive implications for both the broader economy and the stock market.
Disclaimer: This article is for educational and informational purposes only and does not constitute investment advice or a recommendation to buy or sell any securities. The companies mentioned are cited as examples within the context of market developments. Investors are advised to conduct their own due diligence and consult their financial advisor before making any investment decisions.
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