India-US Trade Talks Stumble: $33 Billion Export Hit, Digital Tax Threat Looms

The path to a long-awaited India-US trade deal looks increasingly uncertain following US President Donald Trump’s new tariffs on Indian imports. Experts warn that the duties, expected to hit Indian exports by nearly $33 billion, could trigger retaliatory measures from New Delhi, including a reimposed digital tax on US tech giants such as Google, Amazon, Meta, and Microsoft.

While both nations remain committed to dialogue, the latest developments highlight the growing complexity of the negotiations, with five major roadblocks threatening progress.

📊 $33 Billion Export Hit Looms

Trump’s tariffs have raised fresh concerns over India’s trade outlook. Analysts say India may look to offset the damage through reciprocal taxes on US imports. Avinash Gorakshkar, a SEBI-registered fundamental analyst, noted:

“The biggest roadblock is India’s $33 billion export loss. To recover, New Delhi may go tough on US demands for dairy and agriculture access.”

🔑 Top 5 Roadblocks to the India-US Trade Deal

1. Mutual Mistrust 🤝

Trade ties between the two nations have often been strained, with more than 90 WTO disputes since 1995. The 2019 withdrawal of GSP benefits cost India $5.6 billion in exports. A 2023 Brookings survey revealed only 41% of Indian policymakers saw US trade policy as mutually beneficial. Despite improved defense and technology cooperation, trust deficits persist.

2. Russian Crude Oil Imports 🛢️

Uncertainty continues over potential penalties on India for purchasing Russian crude. Although Trump’s tariffs do not directly target Indo-Russian oil trade, Indian refiners have already reduced imports amid concerns over future sanctions, raising risks of higher fuel costs and inflation.

3. Unpredictable Negotiation Environment ⚖️

Frequent US policy shifts — from Obama to Biden to Trump — have made trade talks volatile. Renewed tariffs on steel (25%) and aluminum (10%) in 2025 added further instability. According to the Trade Policy Uncertainty Index, volatility in India-US trade rose 32% since 2022.

4. Access to Dairy and Agriculture 🐄🌾

The US is pushing for entry into India’s dairy and agriculture sectors, seeking to export poultry, corn, ethanol, and hormone-treated dairy products. Experts warn that this could harm India’s small farmers. A NITI Aayog–CRISIL study suggests US dairy entry could slash Indian prices by 17%, endangering livelihoods in a sector that employs 58% of India’s rural workforce.

5. Geopolitical Divergence 🌍

India continues to balance ties with Russia, a $10 billion defense partner, while also deepening defense trade with the US, which hit $20 billion in 2024. Washington wants India more aligned against China, but New Delhi insists on strategic autonomy, highlighted by its refusal to scrap the S-400 missile deal despite US pressure.

🔮 What Lies Ahead

Experts say progress on the trade deal will depend on calibrated concessions, a permanent consultative mechanism, and a depoliticized approach to trade diplomacy. With elections approaching in both countries (India in 2029, US in 2028), nationalist sentiments could further complicate negotiations.

Yet, shared interests — from Indo-Pacific security to climate technology and supply chain resilience — keep the door open for continued engagement.