By: Ashita Jain
India and the United States have never been more economically intertwined, even as recent U.S. tariff measures have significantly unsettled the terms of that relationship. With $149.4 billion in bilateral goods trade in 2025 and a $58.2 billion Indian trade surplus, India is currently negotiating a trade deal with its most important export market under the most legally unstable tariff conditions in recent times.
For context, the February 2026 India-U.S. Joint Statement outlined a broad framework for an interim trade agreement. Under the framework, India agreed to eliminate or reduce tariffs on U.S. industrial goods and select agricultural products, while the United States indicated its willingness to remove reciprocal tariffs on or grant concessions to several Indian exports, including generic pharmaceuticals, gems and diamonds, and auto and aircraft parts. Beyond tariffs, both sides agreed to cooperate on economic security alignment and address barriers to digital trade, with New Delhi also agreeing to address “long-standing” non-tariff barriers to the United States’ medical devices and agricultural imports, and to eliminate restrictive import licensing procedures for U.S. information and communication technology goods. India also indicated that it would purchase $500 billion of U.S. energy, aircraft, precious metal, technology and coking coal products over five years.
Yet just two weeks after the Joint Statement, the U.S. Supreme Court invalidated the reciprocal tariff regime that the Joint Statement had been built around. On the same day, the administration subjected all imports into the United States, unless expressly exempted, to a temporary 10% ad valorem tariff surcharge following the Donald Trump administration’s invocation of section 122 of the Trade Act 1974, citing concerns over its balance-of-payments deficit. That surcharge, which is set to expire on July 24, 2026, is itself under a cloud after the U.S. Court of International Trade found in May 2026 that it did not meet Section 122's balance-of-payments threshold. That ruling is stayed by the Federal Circuit, and even if enforced, will affect only the named plaintiffs.
Parallelly, under Section 232 of the Trade Expansion Act 1962, the United States continues to impose tariffs over national security concerns on imports of steel, aluminum, and copper, currently at 50% on primary metal articles for most countries, including India, with reduced rates of 25% or 15% applying to select derivative products and preferential partner countries. A separate 25% Section 232 tariff on automobiles and auto parts remains in force, with India, unlike the United Kingdom, European Union, Japan, and South Korea, having secured no reduction.
Compounding the complexity, the United States Trade Representative, in March 2026, initiated two investigations under Section 301(b) of the Trade Act of 1974 concerning structural excess capacity in manufacturing sectors, and the failure to prohibit the importation of goods produced with forced labor in select economies including India. The latter investigation has resulted in a proposed additional 12.5% Section 301 tariff on Indian imports. The U.S. government's own brief has contemplated the possibility of future litigation arising from new Section 301 actions.
The proposed trade deal with the United States should be read against India's wider trade agenda. The UK-India free trade agreement (FTA) enters into force on July 15, 2026. The EU-India FTA was concluded in January 2026, securing preferential access to EU markets across 97% tariff lines and representing India's most significant trade achievement in decades. The European Free Trade Association (EFTA)-India agreement was implemented in October 2025, anchored around a $100 billion investment commitment. Canada-India trade negotiations were relaunched this year. With these deals in place or advancing, the United States is now the outlier. Indian exporters to the EU, UK, and EFTA now have tariff certainty, while those exporting to the United States face a layered and unstable tariff environment with no resolution in sight.
The United States has the economic leverage and political appetite to push hard for access to the Indian market. But for Indian negotiators, the legal basis for the very tariffs India is negotiating against keeps shifting: Section 122 is in litigation, the reciprocal tariff regime has been struck down, and the U.S. government's own court brief acknowledged the prospect of new Section 301 actions facing legal challenge. The proposed India-U.S. trade deal discussions are distinct from traditional FTA negotiations, for they resemble a strategic economic partnership being negotiated under tariff pressure and in pursuit of an increasingly elusive sense of predictability for Indian exporters.
Ashita Jain is an international trade and investment law professional, formerly an Associate at the Centre for Trade and Investment Law, Indian Institute of Foreign Trade.