India and US are unlikely to sign a trade deal until US launches fresh Section 301 investigations against India’s competitors — Pakistan, Sri Lanka, Philippines — concludes them, and places tariffs on them, a person familiar with process.
Reason: In March 2026, US opened two 301 probes — forced labour and excess capacity. Pakistan, Sri Lanka, Philippines were investigated for forced labour, tariffed at 10%. India was probed for excess capacity, likely to be tariffed at 8%, bringing overall tariff to 18%. But they are not on excess capacity list. So no legal instrument to raise their tariffs to previous levels to create level playing field.
It was strategic mistake Pakistan was not included in excess capacity list, source said. Fresh 301 investigations against some competitors likely in near future, but timelines not decided. So Piyush Goyal’s visit for G-20 trade ministerial from Sept 30 unlikely to yield deal.
Complicating matters, last Friday Trump signed Lindsey O. Graham Sanctioning Russia and Iran Act, enabling executive to impose up to 100% tariffs on top five importers of Russian oil — includes India and China. Relationship between new law and bilateral deal not straightforward — sanctions can be suspended in American national interest. Trump administration mindful of global oil prices and US gas at pump before midterms Nov 3. India is third largest importer of crude, second biggest market for Russian crude.
Thus trade deal hostage to two things — US needs to first punish India’s low-cost rivals to justify deal, and needs India’s oil buying to not spike US pump prices. Commerce Secretary Rajesh Agrawal’s optimism clashes with legal reality. Trade is no longer economics, it is sequencing of punishments.