Wednesday, 13 August, 2025
After five rounds of intensive negotiations, Indian officials were so confident of clinching a favourable trade deal with the United States that they signalled to domestic media the possibility of capping tariffs at 15%. But what was anticipated as a landmark trade agreement unraveled spectacularly when US President Donald Trump signed an executive order slapping an additional 25% tariff on Indian goods over New Delhi’s continued energy ties with Russia.
Caught off guard, the Indian government lashed out, labelling the move as “unfair, unjustified, and unreasonable.” In a sharply-worded statement, the Ministry of External Affairs (MEA) said the US action was unwarranted and “failed to acknowledge India’s energy security needs for its 1.4 billion people.” The statement also accused Washington of selectively targeting New Delhi for actions that many other nations are pursuing in their own national interests.
Indian officials had expected Trump himself to announce the long-negotiated deal well before the August 1 deadline. That announcement never came. Instead, New Delhi now faces an abrupt 25% tariff hike starting Friday, along with unspecified penalties over Russian oil imports. Meanwhile, Trump has finalised trade agreements with Japan, the EU, and even extended better terms to arch-rival Pakistan.
Interviews with Indian and US officials reveal a saga of overconfidence, political miscalculations, and fractured communication that led to the collapse of a deal that was, on paper, nearly finalised. Despite technical agreements on many fronts, bitterness and shifting expectations derailed what could have been a defining moment in India-US trade relations — a relationship now valued at over $190 billion.
Both sides believed significant progress had been achieved after Indian Trade Minister Piyush Goyal’s visit to Washington and US Vice President J.D. Vance’s trip to New Delhi. Indian negotiators thought they had made substantial concessions: zero tariffs on industrial goods (which comprise 40% of US exports to India), gradual reductions in auto and alcohol duties, and an expanded commitment to US energy and defence imports.
“Most differences were resolved after the fifth round in Washington,” said an Indian official, adding that negotiators believed Washington would show flexibility on India’s reluctance regarding duty-free access for US agricultural and dairy products — sectors politically sensitive in India.
But this assumption proved to be a misjudgment. Trump, known for his preference for headline-grabbing deals, was looking for sweeping market access and high-profile investment commitments. “Progress was made, but it never amounted to the kind of comprehensive deal we were seeking,” a White House official said.
Indian confidence was buoyed by Trump’s public remarks about a “big” upcoming deal, which New Delhi interpreted as a sign that the US would accommodate their sensitivities. Indian negotiators hardened their stance on agriculture and dairy, miscalculating that India’s growing market and strategic importance would give it leverage.
But the geopolitical landscape was shifting. Trump finalised trade deals with key partners like Japan and the EU, who offered more aggressive concessions. Even South Korea secured a favourable 15% tariff rate by offering substantial investments, energy deals, and agricultural market access — terms India was unwilling to match.
A key factor that derailed the talks was a breakdown in direct communication. Despite being close to a breakthrough, no direct call took place between Prime Minister Narendra Modi and President Trump. While White House officials insist such intervention wasn’t necessary, Indian officials felt Modi couldn’t risk a high-stakes conversation where Trump might publicly push for last-minute demands.
Adding to the strain were Trump’s repeated remarks about mediating the Kashmir issue — statements that irked New Delhi and made Modi wary of engaging directly. “Trump’s Pakistan comments further poisoned the atmosphere,” one senior Indian official said. “It was a missed opportunity to control the narrative.”
Diplomatic misjudgments also compounded the problem. Indian officials admitted they underestimated the necessity of high-level diplomatic manoeuvring after Washington finalised trade agreements with other Asian partners. “We lacked the diplomatic heft once the US pivoted towards more lucrative deals elsewhere,” an Indian negotiator conceded.
As negotiations floundered, Trump’s patience wore thin. On Tuesday, he escalated matters by announcing a sharp increase in tariffs on Indian imports, accusing New Delhi of fuelling Russia’s war in Ukraine through continued oil purchases.
Yet, despite the setback, both sides are still keeping channels open. A US delegation is expected in Delhi later this month, and officials on both sides suggest that a deal, though heavily dented, could still be salvaged.
Indian negotiators are now reassessing their position, particularly on agriculture and dairy concessions. Additionally, New Delhi may offer to reduce Russian oil purchases in exchange for favourable US pricing and energy agreements.
“The path to a win-win deal is still open,” said Mark Linscott, a former US Trade Representative. “But it will require Modi and Trump to engage directly. Without that, we are in a lose-lose spiral.”
As the world’s largest and fifth-largest economies navigate this diplomatic impasse, the coming weeks will determine whether pragmatism can overcome bruised egos and geopolitical distractions.
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After five rounds of intensive negotiations, Indian officials were so confident of clinching a favourable trade deal with the United States that they signalled to domestic media the possibility of capping tariffs at 15%. But what was anticipated as a landmark trade agreement unraveled spectacularly when US President Donald Trump signed an executive order slapping an additional 25% tariff on Indian goods over New Delhi’s continued energy ties with Russia.
Caught off guard, the Indian government lashed out, labelling the move as “unfair, unjustified, and unreasonable.” In a sharply-worded statement, the Ministry of External Affairs (MEA) said the US action was unwarranted and “failed to acknowledge India’s energy security needs for its 1.4 billion people.” The statement also accused Washington of selectively targeting New Delhi for actions that many other nations are pursuing in their own national interests.
Indian officials had expected Trump himself to announce the long-negotiated deal well before the August 1 deadline. That announcement never came. Instead, New Delhi now faces an abrupt 25% tariff hike starting Friday, along with unspecified penalties over Russian oil imports. Meanwhile, Trump has finalised trade agreements with Japan, the EU, and even extended better terms to arch-rival Pakistan.
Interviews with Indian and US officials reveal a saga of overconfidence, political miscalculations, and fractured communication that led to the collapse of a deal that was, on paper, nearly finalised. Despite technical agreements on many fronts, bitterness and shifting expectations derailed what could have been a defining moment in India-US trade relations — a relationship now valued at over $190 billion.
Both sides believed significant progress had been achieved after Indian Trade Minister Piyush Goyal’s visit to Washington and US Vice President J.D. Vance’s trip to New Delhi. Indian negotiators thought they had made substantial concessions: zero tariffs on industrial goods (which comprise 40% of US exports to India), gradual reductions in auto and alcohol duties, and an expanded commitment to US energy and defence imports.
“Most differences were resolved after the fifth round in Washington,” said an Indian official, adding that negotiators believed Washington would show flexibility on India’s reluctance regarding duty-free access for US agricultural and dairy products — sectors politically sensitive in India.
But this assumption proved to be a misjudgment. Trump, known for his preference for headline-grabbing deals, was looking for sweeping market access and high-profile investment commitments. “Progress was made, but it never amounted to the kind of comprehensive deal we were seeking,” a White House official said.
Indian confidence was buoyed by Trump’s public remarks about a “big” upcoming deal, which New Delhi interpreted as a sign that the US would accommodate their sensitivities. Indian negotiators hardened their stance on agriculture and dairy, miscalculating that India’s growing market and strategic importance would give it leverage.
But the geopolitical landscape was shifting. Trump finalised trade deals with key partners like Japan and the EU, who offered more aggressive concessions. Even South Korea secured a favourable 15% tariff rate by offering substantial investments, energy deals, and agricultural market access — terms India was unwilling to match.
A key factor that derailed the talks was a breakdown in direct communication. Despite being close to a breakthrough, no direct call took place between Prime Minister Narendra Modi and President Trump. While White House officials insist such intervention wasn’t necessary, Indian officials felt Modi couldn’t risk a high-stakes conversation where Trump might publicly push for last-minute demands.
Adding to the strain were Trump’s repeated remarks about mediating the Kashmir issue — statements that irked New Delhi and made Modi wary of engaging directly. “Trump’s Pakistan comments further poisoned the atmosphere,” one senior Indian official said. “It was a missed opportunity to control the narrative.”
Diplomatic misjudgments also compounded the problem. Indian officials admitted they underestimated the necessity of high-level diplomatic manoeuvring after Washington finalised trade agreements with other Asian partners. “We lacked the diplomatic heft once the US pivoted towards more lucrative deals elsewhere,” an Indian negotiator conceded.
As negotiations floundered, Trump’s patience wore thin. On Tuesday, he escalated matters by announcing a sharp increase in tariffs on Indian imports, accusing New Delhi of fuelling Russia’s war in Ukraine through continued oil purchases.
Yet, despite the setback, both sides are still keeping channels open. A US delegation is expected in Delhi later this month, and officials on both sides suggest that a deal, though heavily dented, could still be salvaged.
Indian negotiators are now reassessing their position, particularly on agriculture and dairy concessions. Additionally, New Delhi may offer to reduce Russian oil purchases in exchange for favourable US pricing and energy agreements.
“The path to a win-win deal is still open,” said Mark Linscott, a former US Trade Representative. “But it will require Modi and Trump to engage directly. Without that, we are in a lose-lose spiral.”
As the world’s largest and fifth-largest economies navigate this diplomatic impasse, the coming weeks will determine whether pragmatism can overcome bruised egos and geopolitical distractions.
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