Opinion Can the US and India finally seal a trade deal? New push targets tariffs, tech rules, and market access

For the US, meanwhile, farm lobbies want India to buy more American corn, soybeans, and other row crops as Washington seeks to diversify exports away from China. Just this week, President Trump threatened new tariffs on Indian rice, responding to complaints from US rice growers about alleged dumping, underlining how quickly domestic pressures can turn a delicate negotiation into a tug-of-war between market access and protection.

Regulatory divergence has further complicated the picture. US officials frequently cite India’s stringent rules as barriers. New Delhi defends such measures as rooted in consumer safety and cultural norms, reflecting a broader philosophy of cautious liberalisation. These mismatches mean that, even beyond tariffs, aligning standards will be slow work, with every step towards convergence running into sovereign prerogatives and entrenched lobbies.

Newer frictions lie in digital trade and labour mobility. India’s data localisation policies — and draft e-commerce rules that stress “digital sovereignty” and local storage — are seen by US companies as costly red flags. Talks on this front have been intense, with Washington seeking some easing of data-storage mandates in return for deeper digital cooperation. Visa and talent mobility add another layer, with Indian professionals powering the country’s IT-led services exports, yet US immigration rules remain tight. In September, Washington announced a steep US$100,000 fee on new H-1B petitions from abroad, widely viewed as prohibitive. New Delhi has made clear that skilled mobility is a priority, even if formally outside a trade mandate, arguing that talent flows benefit both economies.

Additionally, energy cooperation is another area ripe for agreement. India’s heavy imports of Russian oil have been a flashpoint with Washington, but they also underscore India’s need for energy diversification. A trade pact could facilitate larger purchases of US energy – from LNG cargos to renewable energy technology – giving India a non-Russian supply option and boosting a major US export category.

Meanwhile, India’s own trade strategy has shifted markedly. After walking away from the RCEP (Regional Comprehensive Economic Partnership) mega-pact in 2019 over fears of import surges from China, New Delhi has leaned into a web of bilateral and mini-lateral deals tailored to its interests. In recent years, it has signed or revived FTAs with partners such as the UAE, Australia, and the UK, and is negotiating with the EU and others.

This flurry reflects a deliberate “China+1” strategy to plug into new supply chains and attract investment that might otherwise flow to China. Aligning more closely with the US, the world’s largest economy and a key Indo-Pacific player, is therefore central to India’s bid to secure its geoeconomic future in a multipolar order, just as Washington sees a deeper trade partnership with India as both a strategic counterweight in Asia and a growing market that could, over time, rival China’s.

Washington now sees India’s latest offers as materially stronger, even as it continues to flag sensitivities on specific imports. This points to movement on both sides: New Delhi is testing the political limits of what it can put on the table, and Washington is increasingly treating India as a core market in its diversification away from over-dependence on a few partners. A first-stage package is therefore likely to target areas with high payoff and manageable domestic costs. Tariff de-escalation is the natural anchor where rolling back the punitive duties of the past year would unclog trade flows, ease balance-sheet stress for exporters in both countries, and signal that coercive tariffs are not the new normal in the relationship.

The more challenging work in 2026 will be to move from damage control to rule-making, sequencing politically sensitive reforms on agriculture, data governance, and skilled mobility while keeping the process insulated from election cycles. If New Delhi and Washington can use this phase to co-design standards for critical technologies, critical minerals, and semiconductor supply chains, the trade framework will help shape the wider Indo-Pacific economic architecture; it will not erase every friction, but it can anchor the India-US partnership in shared prosperity, risk diversification, and long-term strategic stability.

The writer is a fellow and lead, World Economies and Sustainability at the Centre for New Economic Diplomacy (CNED) at the Observer Research Foundation