US-India trade deal: Inside the key sticking points

US-India trade deal: Inside the key sticking points June 29, 2026India and the United States have made substantial progress toward signing a landmark Bilateral Trade Agreement (BTA), but following multiple rounds of talks, there has been no significant breakthrough. The reasons lie in familiar fault lines in global trade — market access, tariffs, and a negotiation where neither side can afford to appear to have blinked first. Relations between Indian Prime Minister Narendra Modi and US President Donald Trump have become strained since they first announced negotiations for a trade deal in February 2025. The two leaders were drawn into a diplomatic tussle in May 2025 after Trump claimed to have brokered a peace deal between India and Pakistan following the Pahalgam attack in India-administered Kashmir. In August 2025, the Trump administration doubled duties on a selection of Indian exports to the US over New Delhi's continued purchases of Russian oil — an additional 25% duty was stacked on top of the 25% reciprocal tariff. Nearly 18 months into talks, experts told DW that they believe Indian Trade Minister Piyush Goyal when he says a deal is "very close." But the deal is unlikely to go through until both sides get a few critical assurances. US Supreme Court shifts leverage In February 2026, a year after the US and India first announced trade talks, the two sides released a framework for an interim trade deal that "reaffirms the countries' commitment to the broader US-India Bilateral Trade Agreement (BTA) negotiations." Under the agreement, India will "eliminate or reduce tariffs" on all US industrial products and a wide range of US food and agricultural goods. New Delhi also plans to buy about $500 billion (€438 billion) worth of US goods over the next five years. The US agreed to reduce Trump's tariffs from 25% to 18% and rescind the punitive extra 25% tariff imposed on India for its purchase of Russian oil. Days later, the US Supreme Court struck down the administration's sweeping tariffs, taking away Washington's original leverage. India adamant to gain competitive advantage India's Commerce Minister Piyush Goyal is seeking an advantage over the country's global competitors. "We obviously have to have some reason to be able to enter into force that agreement we have already agreed upon," Goyal said last week, while attending the India Global Forum in London. It cannot come into force unless India secures a competitive tariff advantage over its competitor nations. "The day that happens, the deal is on," he said. India is increasingly positioning itself as a manufacturing hub in an effort to become a key player in global value chains. Several Asian economies — such as China, Malaysia, and Vietnam — have grown using this model. As New Delhi looks to move the country up the ranks of the world's largest economies, securing a competitive trade advantage with the US would be critical. Agriculture market access Just as Goyal needs to show India a victory by gaining competitive tariffs, the Trump administration needs to show US farmers some foray into India's agricultural markets. American corn, soybeans and dairy are at the center of that discussion. China has been a significant driver of the US agricultural sector, importing a wide range of goods. But years of trade wars and geopolitical tensions have made Beijing look elsewhere. Chinese purchases of US soybeans and corn have sharply declined as it has switched to other markets like Brazil. As a result, Trump has been trying to find new markets for American farmers — a key political base for the president. Washington has also been pushing New Delhi for market access for genetically modified crops, pulses, grains, dairy, and dry fruits. However, farm bodies have warned Modi's government that lowering tariff and non-tariff barriers would lead to billions in losses of farmer income. About 40%–50% of India's population is directly or indirectly employed in the nation's agricultural sector and farmers hold significant political sway. In 2021, massive farmer protests in India forced the Modi government to repeal three newly implemented laws, which farmers believed would eat into their income. It is one of the biggest defeats PM Modi's government has faced in 12 years of power. Former Assistant US Trade Representative for South and Central Asia, Mark Linscott, believes that agricultural access is a sticking point but not a deal breaker. "I think it's been understood between the two sides that the most sensitive issues are not on the table," he told DW. "Dairy is off the table. It never really has been a serious area of negotiation. Genetically modified crops, at least for human consumption, are off the table." India is more likely to give some access to the pulses and dry fruits market, he added. A deal with an end date? As United States Trade Representative Jamieson Greer visited India to iron out the details of the first phase of the US-India trade deal, speculation grew that the Modi government may demand a sunset clause. This came after the European Parliament approved a deal for lower US tariffs on June 16 that included a sunset clause requiring the agreement to expire on December 31, 2029 — unless both parties agree to extend it. Vivek Mishra, deputy director of the Strategic Studies Program at the Observer Research Foundation (ORF), a New Delhi-based think tank, said India would benefit from a similar deal since it is opening up sensitive sectors like agriculture to the US market. "We should be able to go back and say, well, you know, end of the deal, now let's move on," he told DW. "This sector is closed at some point. Let's say 10 years, 15 years. That's one conversation I'm told is happening. And that's a sticking point." India seeks clarity on tariff risks Following the US Supreme Court ruling on reciprocal tariffs, the Trump administration found a proxy way around: investigations under the US Trade Act. In March, the Office of the United States Trade Representative (USTR) launched two probes covering 60 economies. India was included in both, and possibly faces 12.5% tariffs related to a forced labor investigation and additional tariffs on another probe for excess capacity. "If tariff levels are effectively predetermined and then adjusted through trade bargaining, questions arise about whether the Section 301 investigations are genuinely about unfair trade practices or simply a tool to extract concessions," Srivastava said. In 2017, the USTR used similar investigations under the Trade Act, under the first Trump administration, to gain leverage against China. "It started with China but then China had leverage," Mishra said, speaking of Beijing's dominance in rare earth materials, which ultimately forced the US to step back. "India does not hold any kind of leverage as China," Mishra warned. "India clearly wants some clarity on what happens down the road on the potential for additional 301 cases, or cases that are still pending," Linscott said. "They want some assurances, ideally, legal commitments that there won't be future actions that would be contrary to what is in this agreement." Will a deal go through? Most experts DW spoke to believe both Washington and New Delhi want a trade deal. And while it is difficult to say how long negotiations will continue, it is unlikely that they will completely fall apart. "India is somewhat unique" in negotiating a comprehensive BTA in phases, Linscott said. "If they can't resolve something now, they can kick the can down the road and put it into the next phase of negotiations." Both Linscott and Mishra believe there is a shift in the way the US views India, which is growing recognition that India is one of the largest economies and does not need the concessions it needed before. It certainly plays an underlying role in the trade talks. "Despite what happened last year, there is a recognition in the US administration that both, from an economic standpoint and from a strategic standpoint, India is really critical," Linscott said. Edited by: Keith Walker