India and the United States have been negotiating a Bilateral Trade Agreement (BTA) since February 2025, when Prime Minister Narendra Modi and President Donald Trump announced their intention to conclude a comprehensive deal . While both sides have repeatedly said they are “very, very close” to finalising an agreement , the pact has faced multiple delays. Here is why.
What was the original framework?
Under the framework announced in February 2026, the US agreed to reduce reciprocal tariffs on Indian goods from 50% to 18%, giving Indian exporters a significant edge over competing Asian economies like Vietnam, Thailand, and China . In return, India offered to eliminate or reduce tariffs on US industrial goods and agricultural products, including tree nuts, wine, and soybean oil, while committing to purchase $500 billion in US energy, aircraft, and technology products over five years .
What changed?
The agreement hit a major roadblock when the US Supreme Court struck down the reciprocal tariff regime on February 20, 2026 . This removed the legal basis for the 18% tariff rate that was central to India’s competitive advantage.
In response, the Trump administration imposed a temporary 10% tariff on imports from all countries under Section 122 of the Trade Act, effective for 150 days from February 24. This measure is set to expire on July 24, 2026 .
With both sides racing against this deadline, the US also launched two Section 301 investigations covering about 60 economies, including India, on issues of excess industrial capacity and forced labour concerns. These could serve as alternative tools for imposing tariffs after the temporary measure expires .
Why India is holding out: The Pakistan factor
Union Commerce Minister Piyush Goyal has made it clear that India will not sign the deal unless it secures a tariff advantage over regional competitors . Speaking at the India Global Forum in London, Goyal explained: “The whole deal was centred around that competitive advantage we got with that 18 per cent over our neighbours and competing countries. That is why the deal was attractive for us” .
The critical issue is Pakistan. According to Mukesh Aghi, President of the US-India Strategic Partnership Forum, Pakistan currently faces a 10% tariff, while India’s tariff stands at 12.5% . “No political leader in India will accept that because it would essentially cost them elections,” Aghi said .
Other sticking points
Dairy and agriculture remain sensitive. The US Trade Representative has called India a “tough nut to crack” in protecting its agricultural markets . India has resisted opening its dairy sector, which supports millions of small farmers .
Non-tariff barriers also persist, including product standards, licensing requirements, and regulatory approvals that affect market access .
Pharma and IT services – India is seeking faster regulatory clearances for generic medicines and smoother visa processes for skilled professionals .
The current status
US Trade Representative Jamieson Greer visited New Delhi from June 22-24 for talks with Goyal. Both sides said “substantial progress” has been made and reaffirmed their commitment to a “balanced, commercially meaningful” agreement .
A senior US official has said the two countries are “very, very close” to a deal . However, until Washington identifies the legal tools to preserve India’s tariff advantage over competitors, New Delhi will not activate the agreement . “The day that happens, the deal is on,” Goyal said .
