US and India open fresh trade talks: What you need to know

The United States and India begin two days of trade talks on Wednesday, seeking movement on an agreement that has remained out of reach for years as steep tariffs, geopolitical tensions and India’s Russian oil purchases complicate negotiations.

US and Indian trade officials are making another attempt to find common ground after Washington imposed 50 per cent tariffs on most Indian goods in August, arguing that New Delhi’s imports of discounted Russian crude effectively support Moscow’s war in Ukraine.

Deputy US Trade Representative Rick Switzer is in India for meetings described by the foreign ministry as a “familiarisation” trip. His visit comes a week after Prime Minister Narendra Modi embraced Russian President Vladimir Putin in New Delhi.

India was among the first countries to start trade talks after President Donald Trump announced sweeping tariffs on most US partners in April. But it remains one of the major economies still without a deal, a gap that carries consequences for jobs, growth and markets.

What’s at stake?

India, the world’s fastest-growing major economy, registered a $45.8 billion goods trade deficit with the United States in 2024. While large export categories such as smartphones and generic drugs fall outside Trump’s tariff regime, many labour-intensive sectors do not.

That has sharpened pressure on an economy struggling to create well-paid jobs for millions of young graduates, and the disruption threatens Modi’s ambition to push India towards high-income status.

Exports fell nearly 12 per cent year-on-year in October, driven by a sharp drop in US-bound shipments. According to the Global Trade Research Initiative (GTRI), labour-heavy sectors including gems and jewellery, textiles and seafood saw export declines of 37–60 per cent between May and September.

Foreign investors have pulled more than $16 billion from Indian equities this year, contributing to the rupee sliding past 90 per dollar. The International Monetary Fund has cut India’s 2026–27 growth forecast from 6.4 per cent to 6.2 per cent, assuming “prolonged 50 percent US tariffs”.

GTRI estimates that exports could fall to about $49.6 billion this fiscal year, from $86.5 billion last year, potentially trimming up to 80 basis points from growth.

The role of Russian oil

India ramped up purchases of discounted Russian crude after the 2022 invasion of Ukraine as Moscow faced sanctions on its oil sales. Trump’s decision to link trade policy with geopolitics disrupted US–India relations in August, with roughly half the tariff burden tied to Washington’s effort to penalise those imports.

Trump has repeatedly said India either plans to stop, or has largely stopped, buying Russian oil — a claim New Delhi has neither confirmed nor denied.

During Putin’s recent visit to the capital, he offered to “continue uninterrupted shipments of fuel”. Modi did not comment on oil flows.

Reliance Industries, a major buyer, said in November that it had stopped importing Russian oil for its export-focused refinery. Smaller refiners such as HPCL-Mittal Energy have said they have stopped entirely. Analysts at Kpler expect a “notable dip” in India’s December–January imports, though it is unclear whether that shift will influence Washington.

Other issues

Agriculture remains an area of friction, with India resisting pressure to cut tariffs on staples like rice and wheat due to concerns over its politically influential farming sector.

A senior commerce ministry official told AFP these matters are “largely resolved”, though Trump on Monday criticised India for “dumping” rice into the United States.

The negotiations are further complicated by Trump’s so-called reciprocal tariffs, though Indian officials say both processes are linked.

“These are two separate, parallel negotiations that are going on, but one will feed into another,” Commerce Secretary Rajesh Agrawal told an industry event last week.

Is a breakthrough likely?

Relations have steadied since August, with progress on smaller issues. The US approved two arms sales worth nearly $93 million in November, while New Delhi struck what it termed a “significant” deal for the United States to supply nearly 10 per cent of its liquefied petroleum gas imports.

Energy commitments have supported previous US trade arrangements, and analysts say the LPG deal may help convince Washington that India is reducing its reliance on Russian energy.

(With inputs from agencies)