The India-US interim trade deal is stuck. New Delhi will not accept the 18% tariff rate Washington wants to retain, sources told BusinessLine. It is inclined to wait until after the US mid-term elections on 3 November before deciding how to proceed1, 2.
For buyers, the immediate effect is that the current duty stack stays as it is, with no signed ceiling over it1. Indian goods entering the US pay an additional 10% under Section 301, imposed over forced-labour concerns. Indian officials see no economic reason to agree to more1.
Why 18% no longer works for Delhi
The framework agreed in February 2026 had Washington cutting its reciprocal tariff on India from 25% to 18%. In return, India would cut duties on a range of industrial and farm goods3. That arithmetic changed when the US Supreme Court struck down the reciprocal tariff regime. The additional duty on Indian goods fell to 10%, and the 18% offer lost most of its value4.
The source quoted by BusinessLine said even a US offer of 14% or 12% would be unacceptable while Indian exporters pay 10%1. Washington is unlikely to go below the existing 10% either, the source added, because that would be unpopular with some US vote banks1.
New Delhi has two other conditions. It wants assurances on any future penalties, whether under the Russia sanctions legislation or the Section 301 excess-capacity investigation. Those penalties should leave Indian exporters facing lower levies than rivals in Vietnam, Bangladesh and Indonesia, the source said. It also wants a commitment that no new tariffs follow signature. Washington has not responded satisfactorily1.
Farm access is the second block. The Trump administration wants agricultural concessions it can present to voters in Republican-leaning states before the vote. New Delhi sees that package as hard to defend at home1. Agriculture remains a sensitive area in the talks, and India is reluctant to expose farmers to more foreign competition3.
The duty stack Indian cargo pays today
Most Indian goods carry the standard US import duty plus the 10% Section 301 forced-labour levy. That levy took effect on July 24, 2026 and covers roughly 60 economies at either 10% or 12.5% depending on origin5, 1. Section 232 duties, such as those on steel and aluminium, sit outside this and cannot be recovered through duty drawback5.
A threatened 100% duty under the Graham Act, aimed at large buyers of Russian oil, was waived by executive order this month6.
Public messaging from both sides has pointed in different directions. Secretary of State Marco Rubio says 99% of the deal is complete and an announcement could follow within weeks1. Finance Minister Nirmala Sitharaman said talks had hit a "plateau"3. US Trade Representative Jamieson Greer said an announcement was not imminent3.
Sales are holding up, but exporters are hedging
US buyers have not walked away. India's goods exports to the US rose 21% to $8.3 billion in August, compared with the same month a year earlier when India faced 50% tariffs3. Gem and jewellery exports rose 13% to $14.30 billion in the first half of this fiscal year, and the US remains the largest market6.
Exporters are still spreading their risk. A leading Tiruppur knitwear exporter said its US exposure has fallen from 85% to 40% in 15 months7.
What happens next
India's reading is that nothing will be signed in the two weeks before the vote. "It makes no sense to sign a deal two weeks before the mid-term elections in the US," the source told BusinessLine1. The elections decide all 435 House seats and 35 Senate seats2.
After the vote, the decision would be how to proceed, according to the source's account1. Trade minister Piyush Goyal said this month that the first tranche was in the final stage of legal drafting3. India would operationalise it "once we get competitive advantage over our peer countries", he said3. The report gave no timeline beyond the election1.