When will stalled India-US trade talks resume? Removal of 25% penalty holds key

The next round of negotiations for the proposed bilateral trade deal agreement was supposed to continue in New Delhi on August 25, but was suspended after US President Donald Trump described India’s purchase of Russian oil as a “deal breaker” and announced the extra duties.

With the fresh levy coming into force on Wednesday, US tariffs on Indian exports have effectively doubled to 50%, the steepest in the world, alongside those on Brazil.

Top US officials, including Trump trade adviser Peter Navarro, have been targeting India for its continued purchase of Russian oil. The Indian government, however, has maintained that India’s energy strategy is guided by market dynamics and national security, calling the new US duties “unfortunate”.

“We may not be negotiating the trade deal right now but engagement is still going on. Negotiating the agreement would entail that the additional 25% will have to be first addressed. Because if we do a trade deal and the additional tariffs are still there, it will not make sense for our exporters,” Express quoted a senior commerce ministry official as saying.

The two sides, however, discussed trade issues at the virtual US-India 2+2 Intersessional Dialogue earlier this week, co-chaired by senior officials from both governments.

With exporters facing higher costs and potential order slowdowns, the Commerce and Industry Ministry is weighing short-term liquidity measures.

The government is reportedly trying to expedite the rollout of its proposed Export Promotion Mission to help exporters hit by steep US tariffs.

India shipped goods worth $87 billion to the US in 2024-25, of which 55% are expected to be hit by the new duties, according to finance ministry estimates.

Industry groups, including a delegation from the Federation of Indian Export Organisations (FIEO) that met Finance Minister Nirmala Sitharaman on Thursday, have flagged concerns over competitiveness, jobs and cash flows, which are under active consideration.

“Export diversification, new free trade agreements, rollout of the export promotion mission and growing domestic market will help provide cushion to Indian exporters from the impact of US tariffs,” PTI quoted an official as saying.

The official said diversification of exports "will help exporters sustain trade trajectory in the long run".