Trade Wars on Hold? India-US Talks Face Critical Test as Section 301 Review Looms Over BTA

Trade Wars on Hold? India-US Talks Face Critical Test as Section 301 Review Looms Over BTA​

The negotiation process for the first tranche of the proposed Bilateral Trade Agreement (BTA) between India and the United States has reached a crucial phase. Commerce and Industry Minister Piyush Goyal is scheduled to meet US Trade Representative Jamieson Greer in New Delhi on June 23-24, amidst ongoing talks that seek finalization.

While both sides suggest the BTA’s initial installment is near completion, the eventual tariff structure remains heavily dependent on the outcome of the contentious Section 301 tariff review. This probe, focused on forced labour and excess industrial capacity, is set to define reciprocal market access commitments post-July.

The Central Sticking Point: Section 301 Tariff Review​

The ongoing US Section 301 investigation represents a significant overhang in the trade relationship. These reviews allow Washington to examine and respond to what it deems unfair practices by its trading partners, potentially through tariff imposition.

A recent development included USTR proposing an additional 12.5 percent tariff on imports from India and 53 other economies. This proposal is currently under consultation and is slated for finalization following a public comment process in July.

Defining the Interim Trade Framework​

An interim trade understanding was reached between India and the United States on February 7, 2026, marking a period of reduced tariff tensions. Under this framework, the US agreed to reduce tariffs on Indian exports from 25 percent to 18 percent. Concurrently, Washington removed an additional 25 percent duty related to purchases of Russian crude.

However, market uncertainty persists due to changes in U.S. Supreme Court rulings regarding emergency tariff authority. Consequently, Washington transitioned towards a temporary 10 percent baseline tariff under Section 122 as an interim measure. This rate is currently applied on top of MFN rates and is set to lapse around July 24, 2026.

India’s Aspirations and Current Commitments​

India is strongly focused on securing competitive tariff treatment for its goods in the US market. The Indian delegation has expressed optimism during meetings aimed at productive discussions covering market access, customs facilitation, and tariff issues within the proposed BTA framework.

The current agreements stipulate that India will reduce or eliminate tariffs on a selection of American industrial goods and certain agricultural products such as tree nuts, fruits, soybean oil, and animal feed. Nevertheless, sensitive sectors like core agriculture and dairy remain outside the scope of concessions for now.

Outlook for Exporters and Future Tariffs​

For Indian exporters, the relationship is currently described as a wait-and-watch scenario regarding specific tariff rates. As one exporter noted, it remains difficult to determine a competitive rate for goods entering US markets until clarity emerges on the Section 301 tariff determinations.

The outcome of the Section 301 probe and subsequent findings are expected to clarify the post-July tariff structure completely. President Donald Trump’s administration has indicated that these investigations could serve as the foundation for replacing the current temporary tariff regime. In parallel, shipments to the U.S., India's largest export destination, stood at $17.29 billion in the first two months of FY27, a slight increase from the $17.21 billion recorded the previous year.