By T N Ashok
NEW YORK: The United States and India are approaching a potentially important turning point in their economic relationship. After months of uncertainty, tariff disputes and disagreements over India’s purchases of Russian oil, negotiations for a bilateral trade agreement (BTA) have acquired fresh momentum. Yet the agreement remains unfinished, and the latest developments suggest that both countries are attempting to secure strategic advantages before committing themselves to a comprehensive commercial arrangement.
The central question is whether President Donald Trump is prepared to give India a durable tariff advantage over competing Asian economies, particularly China, Vietnam and Bangladesh, in return for greater access to India’s vast consumer market and closer cooperation in energy, defence and technology. The answer will have consequences well beyond bilateral commerce.
Trump’s engagement with Chinese President Xi Jinping has to be understood against the background of an increasingly complicated US-China economic relationship. Trump visited Beijing in May 2026, and the two leaders subsequently continued their engagement during Xi’s September state visit to Washington. Their discussions helped stabilise relations, although neither side resolved the fundamental disagreements over trade imbalances, technology restrictions, critical minerals, Taiwan and the future architecture of global supply chains.
The September summit produced a limited trade understanding, including an extension of the existing trade truce and arrangements for reducing tariffs on selected non-sensitive goods. It was not a comprehensive settlement of the economic rivalry. The November APEC meeting in Shenzhen is expected to provide another opportunity for engagement, with a possible Trump-Xi meeting on the sidelines.
For India, the significance is considerable. Washington’s China policy is no longer exclusively about imposing tariffs on Chinese products. It is also about reducing excessive dependence on Chinese manufacturing, diversifying supply chains and identifying countries capable of absorbing investment and production that might otherwise remain concentrated in China.
India is an obvious candidate, but it is not the only one. Vietnam, Indonesia, Malaysia, Thailand and Bangladesh are competing aggressively for manufacturing investment and American market access. New Delhi therefore understands that strategic partnership alone will not guarantee preferential commercial treatment. It must negotiate the economic terms.
Secretary of State Marco Rubio’s October 20-21 visit to India was important because it signalled that Washington wanted to restore momentum after negotiations had repeatedly stalled. Meeting External Affairs Minister S. Jaishankar in Mumbai, Rubio described the proposed trade agreement as being very close to completion. In an interview with The Indian Express, he indicated that approximately 99 per cent of the work had been completed, with only a small number of outstanding issues remaining.
He expressed optimism that the agreement could be finalised within weeks. Rubio also made an important distinction regarding India’s energy relationship with Russia. Rather than treating Russian oil purchases as the sole measure of bilateral relations, he emphasised India’s broader desire to diversify its energy sources. Washington, he suggested, was prepared to become a more important supplier of India’s energy requirements.
The two countries also discussed technology, defence, energy cooperation and regional security. Rubio reiterated that Washington’s relationship with other countries would not come at India’s expense. However, the diplomatic optimism did not immediately translate into a signed agreement.
On November 2-3, a two-member American delegation returned to New Delhi for discussions on customs procedures and trade facilitation. According to Indian officials, the two sides are continuing negotiations to finalise the first tranche of the BTA. The November 10 confirmation by an Indian official, reported by Reuters, is important because it establishes that the negotiations remain active despite the political turbulence in Washington.
Tariffs have been the most visible source of friction. The February 2026 US-India joint statement established a framework for an interim agreement. Washington proposed an 18 per cent reciprocal tariff rate for qualifying Indian-origin goods, alongside the removal of additional duties on selected products. India, in turn, agreed to reduce tariffs on American industrial products and a range of agricultural and food exports.
The framework also envisaged a broader agreement covering services, investment, digital commerce, intellectual property, customs, technical standards and regulatory cooperation. But the American Supreme Court’s February 20 ruling invalidating the administration’s use of emergency powers to impose sweeping reciprocal tariffs fundamentally altered the negotiating environment.
The proposed 18 per cent arrangement consequently ceased to be a straightforward tariff benchmark. The subsequent American tariff measures, including Section 301 duties, created a new landscape in which India had to renegotiate its relative position. This explains why New Delhi is now seeking a comparative advantage over competing economies rather than merely accepting a headline tariff reduction.
India’s Commerce Ministry has highlighted the importance of securing more favourable treatment than competitors such as Vietnam, Bangladesh and Cambodia. An Indian government statement in July also pointed to India’s placement in a lower tariff tier in the American forced-labour-related trade investigation.
The logic is straightforward. If Indian textiles, leather goods, footwear, engineering products, chemicals and manufactured components face lower effective duties than comparable products from competing economies, American importers have a financial incentive to shift sourcing towards India.
Such a differential could become a powerful instrument for attracting investment. But the advantage must be measured against the actual duties applicable to each product, including ordinary customs duties, trade-remedy measures and sector-specific restrictions. A political assurance is not the same as a binding preferential tariff schedule.
The biggest obstacle to a comprehensive agreement remains agriculture. The United States wants greater access to India’s enormous food market, particularly for agricultural commodities, processed food, animal feed, dairy-related products and other farm exports.
India, however, cannot treat agriculture as just another negotiating item. Millions of small farmers depend on government-supported procurement, minimum support prices and restrictions designed to protect domestic production. Dairy is particularly sensitive because millions of rural households depend on milk production for their livelihoods.
Washington has sought reductions in tariff and non-tariff barriers affecting American agricultural exports. India has resisted concessions that could expose vulnerable producers to competition from highly mechanised American agriculture.
New Delhi has indicated that sensitive products, including rice, wheat, poultry and dairy, must remain protected. A sensible compromise would distinguish between products that can be opened to greater competition and those that require safeguards, quotas or explicit exclusions. This is where a limited first-stage agreement could prove more practical than attempting to resolve every disagreement simultaneously.
India’s purchases of discounted Russian crude became a major irritant in the relationship after the Ukraine war intensified. Washington argued that continued purchases supported Moscow’s financial capacity. New Delhi countered that energy procurement was a matter of national interest, determined by affordability, availability and the requirements of a population exceeding 1.4 billion.
The February framework included an American decision to remove the additional 25 per cent duty previously imposed on Indian imports in connection with Russian oil purchases. But the underlying disagreement has not disappeared. Rubio’s October comments suggest that Washington is increasingly interested in encouraging India to diversify its energy portfolio rather than demanding an immediate and complete break with Russia.
The United States has considerable potential to increase exports of liquefied natural gas, crude oil and other energy products to India. It can also expand cooperation in nuclear energy and advanced energy technologies. The February framework envisaged Indian purchases of approximately $500 billion in American energy products, aircraft, technology, precious metals and other goods over five years. That figure is an ambitious purchasing intention, not a completed order book. Its realisation will depend on commercial viability, infrastructure, prices and the availability of American supplies.
Beyond tariffs, technology could become the most consequential component of the relationship. India’s expanding digital economy, semiconductor ambitions, data-centre investments and artificial intelligence infrastructure offer opportunities for American companies. The February framework specifically identified increased trade in graphics processing units and other equipment required for data centres.
For India’s PM Narendra Modi, the objective should be to secure a trade arrangement that expands India’s export opportunities without compromising agricultural livelihoods, energy security or strategic independence. For Trump, India offers a potentially vast market, an alternative manufacturing base and a partner in shaping the economic balance of the Indo-Pacific.
The real test will not be the warmth of diplomatic statements or the optimism expressed at summit meetings. It will be the tariff schedules, market-access commitments, investment flows and actual movement of goods across borders.
India and the United States may be closer than at any point in the recent negotiations. But the destination is not yet a comprehensive free-trade partnership. It is a carefully negotiated strategic economic compact whose success will depend on whether both governments are willing to exchange political assurances for enforceable commercial commitments. (IPA Service)
