India will delay signing a trade deal with the United States for a few months, as new investigations by President Donald Trump’s administration into what it calls “excess industrial capacity” in trading partners are causing new complications, four Indian sources said according to Reuters.
New Delhi had initially planned to sign an interim deal in March, followed by a full agreement later, after Washington agreed in early February to cut punitive tariffs on Indian imports in return for commitments such as halting Russian oil imports, lowering duties on US goods, and pledging to buy USD 500 billion worth of American products.
Initial Timeline for Interim Agreement Slips
The timeline for signing the deal could now be delayed by several months, the sources said, though US officials maintain they expect India to honour its commitments. The Indian sources, all government officials with direct knowledge of the matter or briefed on it, declined to be named as they were not authorised to speak to the media.
A spokesperson from India’s trade ministry denied that bilateral engagement had stalled, saying, “It is reiterated that the two sides remain engaged for a mutually beneficial trade agreement,” without specifying when the deal would be formally signed. A White House official said the US continues to work with India on finalising the agreement.
Impact of Supreme Court Ruling and Iran Conflict
Negotiations lost momentum after the US Supreme Court struck down Trump’s tariffs in late February, the Indian government sources said, and no substantive talks have taken place since, particularly as Washington has been focused on the war in Iran.
India has not fully halted Russian oil purchases, only slowed them, and US officials are urging New Delhi to increase buying to help ease a global energy crunch caused by the conflict.
New Section 301 Probe Adds Pressure
Complicating matters further, the US has launched a new investigation into what it describes as “structural excess capacity and production in manufacturing sectors” in 16 trading partners, including India.
“We are not in a hurry to sign any deal. The new investigation is a pressure tactic to force countries into signing deals after the court order. It’s a spanner in the works,” said one of the sources reportedly.
India Adopts ‘Wait and Watch’ Approach
India is largely adopting a “wait and watch” approach as US tariff policy evolves. The source noted that Trump previously dropped a 25% punitive tariff on India after New Delhi agreed to diversify its oil supply base rather than fully halting Russian crude imports. The overall tariff on India had been 50%, among the highest globally.
The latest probe has been launched under Section 301 of the US Trade Act of 1974. India plans to present its case to the Office of the United States Trade Representative if permitted, or await a ruling before considering options such as approaching the World Trade Organization.
US Expects India to Honour Commitments
Speaking at the India Today Conclave, US Ambassador to New Delhi Sergio Gor said, “So we fully expect the nations that we’ve made deals with to honour those deals. I think India will do that because, it’s not just about honouring it, it’s a win-win situation.” Following the Supreme Court ruling, Trump imposed a 10% tariff on imports from all countries through July 24.
Under the early understanding, which a New Delhi–Washington joint statement called a “framework for an interim agreement,” India’s U.S. exports were expected to face duties of 18%. India is now seeking clarity on whether Washington would revert to that rate or apply a different level.
Caution Makes Strategic Sense
As per Reuters, Priyanka Kishore of Singapore consultancy Asia Decoded said, “It makes sense for India to slow down on trade talks. If you are at 10% tariff and these investigations are going through, it is better to hold out and see what they come up with, rather than proactively sign an agreement.”
This structured version with subheadings makes the story easier to read, highlighting the reasons for the delay, the US perspective, and India’s cautious approach in light of new developments.