India has realised that trade talks with the United States have reached a plateau, and that it is impossible to accommodate Washington’s demands, especially the irrational and constantly shifting tariff rates that make a stable bilateral deal virtually impossible.
Addressing the Munich Leaders Meeting in New Delhi (October 5, 2026), Union Finance Minister Nirmala Sitharaman admitted that “further concessions might be difficult.” Pointing out that negotiations are continuing, she said, “Maybe, if there is room to operate from, both sides would do it.” Sitharaman said the existing trade imbalance between the two countries favours India and that the US would naturally seek to narrow the gap. New Delhi has chased the deal since February 2025, hoping to strengthen economic ties and resolve market access issues.
Sitharaman lamented the “weaponising” of tariffs to tackle trade imbalances. Pointing to India’s large trade deficit with China, she said New Delhi prefers to resolve imbalances through talks. Current Indian exports to the United States stand at US$ 42.79 billion (April to August), according to official data.
The path became more difficult after a new bill authorised President Donald Trump to impose tariffs of up to 100% on countries buying significant amounts of Russian oil, including India and China. As one of the largest buyers of Russian oil, Trump alleged that India was helping Moscow to withstand sweeping Western sanctions after its war on Ukraine in 2022. While India has been widening its purchases of oil and gas over the years, boycotting Russian oil could seriously impact government revenues.
Union Minister of Commerce and Industry Piyush Goyal met US Trade Representative Jamieson Greer on the sidelines of the G20 Trade Ministers’ Meeting in Milwaukee, US, on October 8, 2026. But consensus proved elusive as Washington insisted, inter alia, on access to India’s agricultural sector for a wide range of products that India cannot accommodate; and oil and natural gas purchases from the US by fully ending purchases from Russia.
Goel responded by demanding a Sunset clause and Forward-MFN (most favoured nation) clause, that virtually nixed a possible deal. The Sunset clause involves a fixed expiration date that automatically ends the agreement on a set date unless both nations formally agree to extend it. It protects India from being tied into permanent commitments if US tariffs change. The European Parliament adopted this clause in its trade deal with America.
The Forward-MFN provision ensures that India automatically receives parity with a lower tariff or more favourable trade concession that Washington grants to a third-party after signing the deal with India.
The prolonged difficulties in the negotiations led India to conclude Free Trade Agreements (FTAs) with several countries and organisations, to salvage its exports. These include the India–European Union (EU) FTA; the India–United Kingdom FTA; the India–UAE CEPA; the India–Australia ECTA; EFTA Trade Agreement with Switzerland, Norway, Iceland, and Liechtenstein; and the India–Oman CEPA.
It may be recalled that the US-India trade talks were jointly announced by Prime Minister Narendra Modi and US President Donald Trump in February 2025, one week after India sealed a deal with the European Union. But despite strenuous efforts and multiple visits to Washington, Commerce and Industry minister Piyush Goyal could not clinch a viable deal.
In February 2026, Trump cut tariffs on Indian exports from 50 percent to 18 percent, in lieu of an Indian agreement to purchase $500 billion in US goods and services over time. With ASEAN countries’ tariff at 19 percent and Vietnam at 20 percent, with additional penalties for transshipment of Chinese goods, this was not bad for Indian exporters. But, as Evan A. Feigenbaum of the Carnegie Endowment observed, Southeast Asian businesses are well integrated into regional supply chains, unlike India.
More pertinently, Feigenbaum questioned how India could buy “$500 billion of anything from the US”, given that US exports to India in 2024 were just $41.5 billion, and services exports $41.8 billion. He called the 25 percent “Russian oil tariff” a fool’s errand, as the US had no realistic chance of persuading India to jettison its relations with Moscow wholesale.
While India was willing to negotiate tariffs and increase purchases from the United States, it could not accept conditions impacting its independent foreign policy. Ties with Moscow especially are based on national interests and cannot be dictated by Washington. Meanwhile, the White House enhanced tariffs on Russian oil to 50 percent.
Events that stunned the world
Suddenly, two momentous events took place almost simultaneously.
On October 8, 2026, Washington suspended eight leading information technology (IT) companies, namely, Microsoft, Adobe, Capgemini, Cognizant, Infosys, Tata, Wipro, and HCL, from a federal labour certification programme that is used to secure green cards for foreign workers. The Department of Labour justified the move on grounds that the disproportionate green cards cornered by these companies put American citizens at a disadvantage, and also refused to process pending applications by these companies.
Vice President J.D. Vance especially criticized Microsoft, saying it misused the immigration system to reduce its American workforce. He said that in 2025, Microsoft laid off 6,000 American workers after certifying that it could not find qualified American employees, and secured more than 6,000 H-1Bs; it filed 3,682 PERM applications, including nearly 1,000 applications for the same positions while firing American citizens.
This means New Delhi must create a nurturing environment for its IT professionals at home. It also means that the H1-B visa will no longer be a bargaining chip in Indian foreign policy.
Second, on October 9, 2026, US President Donald Trump announced on social media that he had concluded a deal with Russian President Vladimir Putin for 300,000 tonnes of diesel to the American and Global markets, an additional 500,000 tonnes in November (when the US mid-term elections are held), and one million tonnes thereafter.
Trump declared that Russia would thereafter release three million tonnes of diesel in the global market. Reiterating “TOTAL CONTROL of the Strait of Hormuz” (sic) and his great energy deal with Russia, Trump stated that diesel prices would soon come down for Americans and the World. This would be especially beneficial for American Farmers, Ranchers, and Truckers. He disjointedly concluded that Iran must not have a nuclear weapon, a view that is totally disconnected from the oil deal with Russia.
Clearly, Trump is feeling the pressure of the lack of success in the war with Iran. His plummeting popularity and the forthcoming mid-term elections in November, the additional closure of the Bab el-Mandeb strait, and a fire causing the shutdown of the Cardón Oil Refinery in Venezuela on October 6, 2026, have forced Washington to deal with the Kremlin.
However, there is a hitch. The diesel Russia is exporting to the US at Trump’s request is probably Iranian, as Russian oil refineries may not be able to produce diesel in the desired quantity, due to Ukraine’s continuing attacks on energy infrastructure. In fact, Russia has been importing part of its own diesel requirements from Iran. In September 2026, thousands of Iranian tanker trucks were spotted in various regions of Russia, including Ryazan, carrying Iranian diesel.
It stands to reason that Russia is most likely importing Iranian diesel and reselling it to the United States at a profit. If this is true, Trump’s attempt to lower US energy prices to woo American voters is financially empowering both Russia and Iran.
Soon after ending the sanctions on Russian diesel, Trump dubbed Volodymyr Zelensky an unelected president and called for fresh elections in Ukraine – a longstanding demand of the Russian leadership. What remains to be seen is whether the partial removal of Russian sanctions will introduce an element of realism in Washington, and whether the trade deal that India believes to be dead in the water can still be revived.
References
- The Trump-Modi Trade Deal Won’t Magically Restore U.S.-India Trust, Evan A. Feigenbaum, February 3, 2026.
https://carnegieendowment.org/emissary/2026/02/india-us-trade-deal-tariffs-trump-modi-relationship
- Cognizant, Infosys, Tata, Wipro, HCL among 8 IT firms suspended from US green card programme, ET Online, Oct 08, 2026.
- India-US trade talks hit ‘plateau’, finance minister says, as tariffs narrow room for deal, Reuters, October 5, 2026
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