India-US trade deal enters legal drafting amid tariff uncertainty

A deal that is finished but not signed

On October 15, Commerce and Industry Minister Piyush Goyal said the first tranche of the India-US bilateral trade agreement has been finalised and is now in legal drafting. He also said India would put it into effect only once it secures a "comparable or competitive advantage" over peer countries.121 Goyal spoke at the Shri Ram College of Commerce centenary conclave in New Delhi. He added that his remarks matched what he had said a week earlier and three months earlier, which suggests New Delhi wants to look consistent at a time when the signals from Washington keep changing.213

Later that day, Commerce Secretary Rajesh Agrawal set out what he called a "very good zone" for the talks, but with a clear condition attached. India will sign only once the US formalises its overall tariff structure and the results of its Section 301 investigations are known.126 Agrawal said the point of the deal was preferential access, not just market access: Indian goods have to come out ahead of competitors in the US market.126

That condition is the real story. In practical terms, the deal is a draft waiting for Washington to decide what its own tariff system will look like.

Why the February framework lost its value

The current stalemate goes back to February. On February 6, the two governments announced a framework under which the US would cut its reciprocal tariff on Indian goods from 25% to 18% and drop a separate 25% penalty linked to India's purchases of Russian oil.2328 In return, India committed to eliminating or reducing tariffs on US industrial goods and on farm products such as tree nuts, fruit, soybean oil, wine and spirits. It also said it intended to buy more than $500 billion of US energy, technology, coal and other goods.23

Two weeks later, the ground shifted. On February 20, the US Supreme Court ruled that the International Emergency Economic Powers Act (IEEPA), the emergency-powers law behind the reciprocal tariffs, does not authorise tariffs at all.1119 Once the tariff was gone, it was no longer clear what the American concession was worth. A rate cut from 25% to 18% means little when the 25% no longer exists.22 US Ambassador Sergio Gor has acknowledged this, saying the two sides "had one done" before the court ruling forced them to rework it.27

Accounts differ on whether the 18% rate was ever actually applied. Some trackers treat it as enacted.1216 One customs guide says it found no executive order putting 18% into effect before IEEPA collection stopped on February 24, and that no interim agreement text had been published as of early October.11 On that reading, the most widely reported number from February may never have reached an invoice.

What Indian goods pay now

The tariffs Indian exporters face today have little to do with the February framework. After the court ruling, the administration put a flat 10% global surcharge in place under Section 122 of the Trade Act. That law caps such duties at 150 days, and the surcharge lapsed on July 24.1419 The same day, a Section 301 tariff tied to forced labour replaced it, with two tiers covering about 60 economies: 10% or 12.5%.1914

India is in the lower tier. Coverage reports that the rate initially proposed for India was 12.5% and fell to 10% after New Delhi banned imports of goods made with forced labour.22 Most Indian goods now pay the normal US duty for their product line plus that 10%, while steel, aluminium and autos still face separate Section 232 duties.11 China, Vietnam and Thailand sit in the 12.5% tier, which gives Indian suppliers a 2.5-point edge on the base rate.1418

This matters for what US consumers pay. One calculator puts the combined rate on Indian apparel at about 26.5% once the base duty is included.18 Indian footwear is described as more attractive for sourcing now that India sits in the lower tier.20 More broadly, Wharton's budget model estimates the average US effective tariff rate at 7.1% as of August 2026, down from its earlier peak after the court ruling but still well above the 2.3% recorded in January 2025.13 Importers who paid the invalidated IEEPA duties can seek refunds, which one estimate puts at roughly $35 billion, but the refunds are not automatic.1719

The result is that US buyers of Indian textiles, footwear and chemicals are paying less than they did at the 50% peak of August 2025, when the reciprocal tariff and the oil penalty were stacked.1116 They still pay more than they did before the trade war. Whether prices on store shelves fall further depends on whether the new deal improves India's position relative to its rivals, and that is exactly the point India is holding out on.

The Russian oil threat, and a temporary reprieve

The second uncertainty eased just as this week's optimism was building. In September, Congress passed the Lindsey O. Graham Sanctioning Russia and Iran Act, and Trump signed it on September 18. It allows tariffs of up to 100% on major buyers of Russian oil and gas and gave them a 30-day window to cut purchases or obtain waivers.30 On Friday, Trump signed an order waiving those sanctions and duties, citing the US national interest.2430

For India, the waiver removes an immediate risk. Russia is still its largest oil supplier, and the US is its largest trading partner.24 Analysts quoted in the coverage say the waiver makes conditions better for closing the deal, while warning that businesses still need predictable tariffs to plan.24 Others are less hopeful. Ajay Srivastava of the Global Trade Research Initiative argues that temporary tariff relief does not justify permanent concessions, and notes that Washington can withdraw the waiver whenever it likes.30 He also points out an inconsistency: the US itself began buying Russian diesel on October 9 under its own waiver, while China is protected from new US tariffs until January 10.3022

The waiver is real relief, but it does not settle anything. It removes a deadline without removing the authority behind it, and that is why Agrawal keeps asking for "tariff stability and trade stability" to be written into the agreement itself.126

Where officials disagree

Official statements about how close the deal is do not line up. Gor said the "big items are done" and that negotiations were moving at an "incredible pace," but he gave no date.125 External Affairs Minister S. Jaishankar said the talks are nearing a "landing point," while noting that India also has to compare its terms with deals other countries have not yet finished.258 US Trade Representative Jamieson Greer said on October 2 that a deal was not imminent, although the remaining sticking points had been identified.128 Finance Minister Nirmala Sitharaman said on October 5 that the talks had reached a "plateau," with little room for further concessions.122

The remaining sticking points are also reported differently. One report names dairy access as the largest obstacle as Secretary of State Marco Rubio heads to New Delhi.28 Another says the excess-capacity investigation under Section 301 is the bigger unknown, though India's recent decision to join a 15-country call against market-distorting overcapacity could lead US trade officials to drop new tariffs on India.221 Friction over H-1B visa fees and green-card processing affecting Indian IT firms adds to the tension.7

The analysis: why India is waiting

Read together, the coverage points to one conclusion. New Delhi's caution looks like a deliberate strategy rather than indecision. Trade is growing even without a signed deal: India's exports to the US rose 11.1% to $50.81 billion in April–September, and imports from the US jumped 26% to $32.33 billion.6 One official quoted anonymously said an interim period of somewhat lower tariffs may serve India better than a deal that requires large concessions, especially since signing has not protected other countries from later US measures.22

India's main leverage is that it can wait. The forced-labour tariff already places it in the cheaper tier. The oil penalty is suspended. A free trade agreement with the European Union is expected to be signed in December.214 All of this lowers the cost of holding out until Washington's tariff framework and the excess-capacity findings are known, which the US is expected to publish within weeks.22

The risk is the same one this year has already shown. Tariff terms in this relationship have changed three times in eight months, through an executive order, a court ruling and the expiry of a statute. India has a finished text. It has not yet received a guarantee that the US tariff rules underneath it will stay in place, and both exporters and consumers are waiting on that guarantee.