The India-US trade talks have been derailed mainly due to several contentious and complex issues related to tariffs, market access, trade barriers, and geopolitical concerns, as follows:

India has resisted opening its agricultural and dairy markets to the US, citing the potential harm to millions of poor farmers. Agriculture has historically been excluded from free trade deals by India to protect domestic livelihoods.

Negotiations on tariff reductions for corn, soybean, wheat, and ethanol have stalled due to concerns over subsidized US farm products. Domestic industries such as automakers, pharmaceuticals, and small businesses also advocate for a gradual and cautious market opening to avoid disruption from US imports.

A major sticking point involves high tariffs: India imposes an average Most Favoured Nation (MFN) tariff of 39% on imported farm goods, with some rates reaching 50%, compared to about 5% in the US. 

The Trump administration has repeatedly flagged these high tariffs as a key obstacle to deeper trade ties, demanding better access to Indian markets for agricultural products, ethanol, dairy, alcoholic beverages, autos, pharmaceuticals, and medical devices.

The US also wants India to reduce non-tariff barriers and reform patents, digital trade, and data flow regulations.

There is also concern over lack of reciprocity. Despite India offering limited tariff cuts and increasing imports of US energy and defence goods, Indian officials say they have not received clear, substantive proposals from Washington.

Meanwhile, Indian exporters are uneasy about rising US tariffs on their exports—10% base tariff, up to 50% on steel and aluminium, and a 25% tariff on autos and many other goods. President Trump announced a 25% tariff on Indian imports starting August 1, 2025, citing India's high tariffs and strict trade barriers. This tariff is higher than those imposed on many countries with recent US trade deals, such as Vietnam (20%) and Indonesia (19%), putting Indian exporters at a disadvantage.

Geopolitical tensions have also complicated matters. Trump’s claims that he brokered a ceasefire between India and Pakistan earlier in the year sparked concerns in New Delhi over perceived US tilt toward Pakistan, thereby affecting broader bilateral relations.

Initial Indian optimism about a trade deal targeting $500 billion bilateral trade by 2030 has faded amid these challenges.

The tariff imposition marks a major setback, though India hopes its exports in pharmaceuticals, electronics, engineering goods, and garments might remain competitive due to tariffs advantages over China. India remains one of the largest trading partners and investors with the US, with $191 billion traded in 2024 and $68 billion in cumulative US investment since 2002.

In essence, the trade talks have stalled due to India's protection of its sensitive sectors like agriculture, high tariff barriers on US goods, demands for broad market access and regulatory reforms by the US, unresolved reciprocal tariff issues, and underlying geopolitical tensions.

The impending 25% US tariff rollout underscores the stalemate and has threatened to unravel months of negotiations aimed at a bilateral trade deal. The US delegation is still scheduled to visit India in August for further talks, but the path to an agreement has become more difficult and uncertain.

Based On Reuters Report