A fresh debate has emerged around the proposed India-US interim trade agreement after trade experts cautioned that signing the deal may not fully protect Indian exports from future tariff actions by the United States. According to the Global Trade Research Initiative (GTRI), the administration of Donald Trump could still impose additional duties on Indian goods despite a trade pact. The concern stems from ongoing American investigations related to alleged forced-labour compliance issues and Washington's broader trade strategy toward partner nations. At the same time, economists have raised concerns over India's reported commitment to purchase up to $500 billion (approximately ₹47.5 lakh crore) worth of American goods over five years, arguing that such imports could widen trade imbalances and exert further pressure on the rupee. The developments come as both countries intensify negotiations aimed at concluding an interim trade agreement.

According to GTRI, recent actions by the US government indicate that trade agreements do not necessarily prevent future tariff measures. The think tank pointed to investigations initiated under Section 301 of US trade laws, which allow Washington to impose duties on countries accused of unfair trade practices or inadequate enforcement of labour standards.

Tariff Concerns Remain

Trade analysts note that the Trump administration has previously considered additional tariffs on countries that allegedly failed to prevent imports linked to forced labour. India has reportedly been among the nations examined under these investigations.

GTRI founder Ajay Srivastava argued that even if tariff rates are reduced through an interim trade arrangement, future investigations could still result in new duties. The organization estimates that proposed reciprocal tariffs could potentially decline from 25% to 18% under a bilateral trade arrangement, though uncertainty would remain.

Officials on both sides have not publicly commented on whether such provisions are being discussed in the ongoing negotiations.

Impact on Rupee

Economist Devinder Sharma has expressed concerns over the scale of proposed purchases from the United States. According to him, importing American products worth nearly ₹47.5 lakh crore over five years could increase demand for US dollars and place additional pressure on the Indian currency.

The rupee has already faced challenges in recent months due to foreign portfolio investor outflows, elevated global trade uncertainty and a rising import bill. Currency market analysts say sustained large-scale imports without corresponding export growth could widen the trade deficit and affect exchange rate stability.

However, supporters of the proposed deal argue that increased imports of energy products, defence equipment, aircraft and advanced technologies could strengthen strategic ties and support long-term economic growth.

What Washington Wants

Reports from recent negotiation rounds suggest the United States is seeking broader market access in sectors such as agriculture, energy, defence, digital services and advanced technologies. Washington is also believed to be encouraging closer economic cooperation and increased purchases of American goods.

In return, the US is expected to offer lower reciprocal tariffs and greater market certainty for selected Indian exports.

The latest round of discussions resumed in New Delhi on Tuesday, where Piyush Goyal met with Jamieson Greer during Greer's two-day visit to India.

The comments come amid ongoing negotiations between India and the United States aimed at resolving long-standing trade issues and strengthening economic cooperation.

Following a phone conversation between Trump and Modi in February, the two countries issued a joint statement outlining the framework for the first phase of a Bilateral Trade Agreement (BTA), also referred to as an interim trade deal.

Under that framework, the United States agreed in principle to lower tariffs on certain Indian goods from 50% to 18%.

Recent Negotiations in New Delhi

Trade officials from both countries held four days of discussions in New Delhi from June 1 to June 4. Representatives from the Office of the United States Trade Representative (USTR) met Indian officials to discuss:

• Trade in goods

• Customs procedures

• Trade facilitation measures

• Non-tariff barriers

• Economic security cooperation

Both sides described the talks as productive and said negotiations are continuing to finalise a mutually beneficial interim agreement.

Challenges Still Remain

Despite signs of progress, some uncertainty remains. The Trump administration is considering additional tariffs on imports from several economies, including India.

A proposed review under Section 301 of the US Trade Act of 1974 could lead to extra duties on imports from countries that the United States believes have not taken adequate measures against goods linked to forced labour.

India, along with China, Japan, South Korea, the United Kingdom, Bangladesh and Vietnam, is among the economies included in the review.

India has officially presented its final proposal to the United States in the ongoing trade negotiations, seeking a major tariff reduction from 50% to 15% and the complete removal of the 25% penalty on crude oil imports from Russia. Officials hope that these final discussions will yield a clear breakthrough early in the new year, potentially reshaping India’s trade dynamics with the US.

India’s Push for a Balanced Trade Framework

The two nations are currently negotiating a comprehensive bilateral trade agreement (BTA) to address long-pending tariff issues and create a balanced trade environment.

Commerce Secretary Rajesh Agarwal confirmed that discussions are “progressing positively,” adding that both sides have agreed on key frameworks, though the final timeline remains undisclosed. "We are optimistic about an agreement that supports fair trade and mutual growth," Agarwal noted.

The trade teams from both countries met in New Delhi this week, focusing on two primary issues: establishing a long-term trade agreement and reducing or eliminating the existing 50% tariff imposed by the US.

The Tariff Breakdown and Penalty Controversy

Currently, the United States imposes a 50% total tariff on Indian exports—with 25% as a reciprocal measure and another 25% linked to India’s continued purchase of Russian crude. According to the US administration, these oil imports indirectly support Moscow’s military actions in Ukraine.

India, however, maintains that its oil purchases are part of legitimate trade and energy diversification efforts, labeling the penalty as “unjustified” and urging immediate removal.

Decline in Russian Oil Imports

Recent data supports India’s case for leniency. Industry reports, including Reuters data, highlight a decline in India’s Russian oil imports—from around 1.77 million barrels per day in November to roughly 1.2 million barrels per day in December 2025.

Officials suggest the figure may drop below 1 million barrels per day in January 2026 due to stricter US sanctions on Russian energy giants Rosneft and Lukoil.

Seeking Equal Treatment as the EU

India’s proposal requests tariff relief in line with the European Union, which enjoys significantly lower duties. By contrast, the US recently reduced tariffs for Indonesia from 32% to 19%, prompting Indian negotiators to push for similar treatment.

“Indian exporters face a competitive disadvantage if tariffs remain higher,” a senior commerce official said. “We are asking for fair and equal access, not special treatment.”

Waiting for the US Decision

Although the framework discussions concluded around Diwali 2025, a formal announcement from the US—most likely from President Donald Trump—is still pending. Sources suggest the White House has yet to finalize its policy stance.

As the year ends, optimism persists in India’s trade circles that early 2026 may bring resolution, paving the way for stronger India-US trade cooperation and easing pressure on Indian exporters affected by high tariffs.