The India-U.S. trade deal, which was anticipated to be finalized by mid-March, has been delayed due to the ongoing Iran war and a recent U.S. Supreme Court ruling against tariffs, shifting the dynamics of the negotiations. The delay follows an inconclusive visit by an Indian trade delegation to the U.S., with both sides stating they are working towards a 'balanced, mutually beneficial, and forward-looking trade agreement' that addresses each other's concerns and priorities [1].
Experts warn that the delay could be costly for India, as the U.S. administration is set to conclude investigations under Section 301 of the Trade Act of 1974 in June. This investigation, launched in March, targets China, India, the European Union, and other economies, aiming to replace tariffs previously imposed under President Donald Trump, which were ruled illegal by the Supreme Court on February 20 [1]. Mark Linscott, former assistant U.S. trade representative, emphasized the importance of sealing the agreement by the end of May, cautioning that India could face higher tariffs than previously agreed if the deal is not finalized before the Section 301 probe concludes [1].
In August of the previous year, the U.S. imposed tariffs as high as 50% on India, partly as a punitive measure related to India's Russian oil imports. These tariffs were reduced to 18% in early February in exchange for India lowering duties on U.S. goods to zero, shifting oil imports from Russia to the U.S. and Venezuela, and committing to purchase $500 billion worth of American goods. Both countries initially hailed the agreement as a success and aimed to sign the first tranche by mid-March. However, the Supreme Court's ruling led the U.S. administration to impose a 10% tariff rate for all trading partners, meaning India would pay a higher rate than others if it agreed to the earlier terms [1].
The Iran conflict is also cited as a factor diverting diplomatic attention towards energy security and crisis management, further stalling trade negotiations, according to Reema Bhattacharya, head of Asia research at Verisk Maplecroft [1].
CONCLUSION
The delay in finalizing the India-U.S. trade deal, driven by the Iran conflict and a U.S. Supreme Court tariff ruling, has increased risks for India, including the potential for higher tariffs. Both sides continue to negotiate, but experts stress the urgency of reaching an agreement before the U.S. concludes its Section 301 investigation in June. The outcome of these talks will have significant implications for India's trade costs and market access.