25 pc penalty must go before fresh trade talks, say Indian officials

Trade negotiations between India and the United States are unlikely to resume until Washington’s additional 25 per cent oil-related tariff on Indian exports is addressed, a senior Commerce and Industry Ministry official was quoted by the media as saying.

Talks that were to continue in New Delhi on 25 August were put on hold after President Donald Trump declared India’s purchase of Russian oil a “deal breaker.” With this penalty stacked on top of existing duties, the US now levies 50 per cent tariffs on Indian exports, effective from Wednesday.

“Negotiating a trade deal while the extra 25 per cent is in place would make little sense for Indian exporters,” a senior official told The Indian Express, making clear that any progress will hinge on removal or modification of the tariffs.

Officials stressed that engagement with Washington has not stopped entirely, pointing to discussions held at this week’s virtual US-India 2+2 Intersessional Dialogue.

However, the next round of structured negotiations will remain deferred until tariff relief is secured.

Exporters fear a sharp drop in orders from the US, with textiles, chemicals and engineering products most exposed. The Federation of Indian Export Organisations (FIEO) has pressed for short-term measures to ease liquidity, while also urging revival of incentive schemes akin to the former MEIS.

The Commerce Ministry is reviewing potential interventions but is cautious about short-term subsidies, instead seeking measures that improve resilience and competitiveness.

The government estimates that 55 per cent of India’s $87 billion worth of exports to the US in 2024–25 could be impacted by the new tariff structure. Until Washington addresses the oil-linked penalty, officials insist, there is little prospect of a meaningful breakthrough in trade negotiations.