India will finalise a long-pending trade agreement with the United States only once Washington offers tariff terms that give Indian exporters an edge over competing suppliers, Commerce and Industry Minister Piyush Goyal said in early September 2026, underscoring that a preferential tariff rate remains the central sticking point in over a year of negotiations. Goyal also dismissed reports that India was “holding back” on the deal as baseless and misleading.
Bilateral trade talks between India and the US began in February 2025 following a meeting between President Donald Trump and Prime Minister Narendra Modi. Since then, the two sides have concluded smaller trade actions, including a February 2026 interim agreement that cut the reciprocal tariff on Indian exports from 50% to 18%, with categories such as spices, tea, coffee, cashew nuts, mangoes and bananas gaining zero-duty access to the US market.
Why Does India Want a Preferential Tariff Rate?
India’s negotiating position centres on securing a tariff rate for its exporters that is lower than the rates the US imposes on competing exporting nations such as Vietnam, Bangladesh and China. Without that relative advantage, Indian officials argue, Indian goods would not gain meaningfully greater access to the US market even if absolute tariffs fall, since rival exporters would remain equally or more competitive on price. The 18% reciprocal tariff agreed in February 2026 was an interim step; a full agreement is expected to lock in sector-specific preferential rates across textiles, engineering goods, pharmaceuticals and electronics.
What Do Exporters and Industry Bodies Say?
Export promotion bodies have pressed the Commerce Ministry to close the deal quickly, warning that prolonged uncertainty is affecting order books for textile, gems and jewellery, and engineering goods exporters competing for US buyers against countries that already enjoy lower tariffs. At the same time, industry groups have broadly backed the government’s insistence on preferential treatment, cautioning that a deal without a relative tariff advantage would offer limited real benefit to Indian shipments.
Market and Trade Reaction
Export-oriented stocks in textiles, auto components and pharmaceuticals have remained sensitive to headlines on the negotiation’s progress, with any signal of an imminent deal typically lifting sentiment in these sectors. Currency and bond markets have shown more muted reaction, with traders treating the trade talks as a medium-term factor rather than an immediate catalyst, given the negotiations have already stretched well beyond initial timelines set in 2025.
What Happens Next?
Commerce Ministry officials are expected to continue engagement with their US counterparts through September and into the final quarter of 2026, with both sides describing the talks as being in an advanced but unresolved stage. A conclusive agreement would need sign-off from the Union Cabinet on the Indian side, while the preferential tariff structure being sought by India would require the US Trade Representative’s office to finalise country-specific rate schedules.
Frequently Asked Questions
What is the main sticking point in the India-US trade deal?
India wants a preferential tariff rate that gives its exporters an advantage over competing countries, rather than just a flat reduction in tariffs, according to Commerce Minister Piyush Goyal.
What tariff rate currently applies to Indian exports to the US?
Under a February 2026 interim agreement, the reciprocal tariff on Indian exports to the US was cut from 50% to 18%, with several agricultural products gaining zero-duty access.
When did India-US trade talks begin?
Bilateral trade negotiations began in February 2025 following a meeting between President Donald Trump and Prime Minister Narendra Modi, and remain unresolved as of September 2026.
Leave a comment