For much of 2025, New Delhi and Washington have been locked in painstaking negotiations to craft an initial framework trade deal, one that could eventually pave the way for a comprehensive bilateral trade agreement (BTA). While India seeks relief from punishing tariffs imposed by United States President Donald Trump under Section 232 of the US Trade Expansion Act, the United States presses for greater market access and structural reforms in India’s trade regime.Despite multiple rounds of talks, optimism has repeatedly given way to frustration, and the deal remains elusive. The reasons lie in a complex mix of geopolitics, economic protectionism, and divergent priorities.The immediate trigger for the current impasse was the escalation of tariffs. India was first hit with a 25% levy, which rattled export-oriented sectors. The situation worsened in August when Trump accused India of indirectly funding Russia’s war effort by continuing imports of Russian oil. This accusation led to a sharp hike in tariffs on Indian goods to 50%, squeezing labour-intensive industries such as shrimp, textiles, leather, and footwear. Indian exporters warned of steep declines in shipments, while New Delhi firmly rebutted Washington’s claims, insisting that sovereign trade decisions could not be dictated externally. The tariffs became both a symbol and a substantive obstacle, casting a shadow over the broader trade talks.Beyond tariffs, longstanding structural issues have resurfaced. American policymakers have long been frustrated with what they perceive as India’s protectionist economic policies. Previous administrations preferred to chip away at these concerns incrementally, but the Trump administration has shown less patience, demanding more immediate concessions. This impatience has collided with India’s cautious approach, where reforms are often gradual and politically sensitive. The perception in Washington that India ‘plays both sides of the fence’ in international politics, maintaining ties with Russia while deepening its partnership with the US has complicated matters. Further, agricultural market access has proven another thorny issue. Washington is pressing New Delhi to open its market to genetically modified (GM) soya and corn, commodities for which the US desperately needs buyers after China scaled back purchases. India, however, has resisted, citing both domestic sensitivities and the strong international demand for its non-GM produce. This clash of priorities has proven difficult to reconcile, and it remains one of the most contentious sticking points.Digital trade and the World Trade Organization’s (WTO) e-commerce moratorium add another layer of complexity. Since 1998, WTO members have agreed not to impose customs duties on electronic transmissions such as streaming, consulting and software. Washington supports making this moratorium permanent, seeing it as essential for the free flow of digital services. India, however, has resisted, preferring to preserve the option of levying duties in the future. Washington views India’s reluctance as a protectionist instinct that could stifle innovation and market access. Despite these challenges, both sides recognise the strategic importance of the partnership. The US is India’s largest trading partner, accounting for about 18% of its exports, with bilateral trade valued at USD 131.84 billion for the fourth consecutive year in 2024-25. The US is also India’s largest foreign direct investor. Venture capital flows from the US fuel India’s startup ecosystem, while remittances from the Indian diaspora in America amount to nearly USD 30 billion annually. These figures highlight the depth of economic interdependence, making the case for a trade deal compelling. But when Trump raised tariffs to 50%, investment began fleeing India. Until July 2025, India’s net FDI position was strong at USD 10.7, but August saw outflows of USD 622 million, followed by USD 1.7 billion in September and USD 1.5 billion in October. By the end of October, net FDI had slumped to USD 6.2 billion.Negotiations in December suggested some progress. A high-level US trade delegation led by Deputy USTR Rick Switzer visited India, and US Trade Representative Jamieson Greer told the Senate Appropriations Committee that India’s offers were “the best the US has ever received.” Ambassador Vinay Kwatra’s meeting with US Ambassador-designate Sergio Gor at Mar-a-Lago was seen as significant, underscoring the political dimension of the talks. India also moved to address US concerns over “burdensome” import-quality requirements, announcing reforms to simplify paperwork, shorten timelines and reduce inspections. These steps were designed to signal goodwill and responsiveness to American complaints.Yet, the final hurdle remains political clearance in Washington. Trump has been unrelenting on tariffs, and his hints of possible action against India’s rice exports in mid-December dampened hopes of a breakthrough. Trump’s defiance has been surprising, especially given the broader strategic alignment between the two countries in the Indo-Pacific.The recent US National Security Strategy (NSS) highlights India’s role in countering Chinese grey-zone activity and strengthening supply chains, underscoring shared interests within the Quad framework. If Washington and New Delhi can separate geopolitical disagreements from trade negotiations perhaps aided by progress on Ukraine peace talks the chances of a deal improve. India’s recent dip in Russian crude imports may help ease tensions, while reforms on import-quality checks demonstrate willingness to address US concerns. On agriculture, creative solutions such as phased market access or joint certification mechanisms could bridge differences. On digital trade, India may seek safeguards while agreeing to extend the WTO moratorium, balancing flexibility with cooperation.Ultimately, the Indo-US trade pact hinges less on technical negotiations and more on political will. The timeline remains uncertain, and while March has been floated as a possible date, the final decision rests with Trump. Working-level discussions have largely been completed, and India’s chief economic advisor has expressed optimism that most issues are sorted. But as he noted, this is as much about geopolitics as bilateral trade. Or perhaps, it all boils down to a perceived slight? Trump’s nomination for the Nobel Peace Prize, championed openly by Pakistan, met in New Delhi with deliberate silence, as India refused to acknowledge his repeated claim of ending the Indo-Pak hostilities.For now, negotiations remain a delicate dance between economics and geopolitics, with tariffs as both the obstacle and the bargaining chip.Vaishali Basu Sharma is a strategic and economic affairs analyst.