Tariffs, Terror, and Trade: Tightrope Walk of India-U.S. Relations
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India’s refusal to liberalize its agriculture sector has become the defining deadlock .
Trade Deal Deadlock over Agriculture & Automotive
India and the U.S. are struggling to finalize a trade deal due to India's resistance to opening its agriculture and dairy sectors to U.S. imports, and the U.S.’s reluctance to lower tariffs on automotive components.
Energy Security & Russian Crude Complications
India's growing dependence on discounted Russian crude oil (36% of imports) has drawn threats of secondary sanctions from the U.S., even as India urges against “double standards” given European purchases of Russian energy via third parties.
Mini vs. Mega Deal Uncertainty
While broader Bilateral Trade Agreement (BTA) talks are scheduled for later in 2025, India remains wary of a surprise “mini deal” announcement by President Trump, as witnessed in past U.S. negotiations with Vietnam and Indonesia.
Strategic Convergence on Counterterrorism
The U.S. designation of The Resistance Front (TRF), a Pakistan-backed group, as a terrorist organization signals deepening Indo-U.S. counterterror cooperation and shared security objectives in South Asia.
Legal Cloud over Indian Corporate Giant
Ongoing legal proceedings against the Adani Group in the U.S., including active criminal and civil cases, add a corporate undercurrent to India-U.S. relations, with implications for investment climate and diplomatic optics.
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JULY 2025
India-U.S. Trade Tango without Trust
As the world's dynamic and largest democracies inch closer to what some optimists have termed a "defining partnership of the 21st century", the India-U.S. bilateral relationship is
simultaneously experiencing forward momentum and hard brakes.
The contours of this strategic alignment stretch across several domains, trade, energy, security, agriculture, technology, and even public diplomacy.
Yet, the past few months have exposed the vulnerability beneath the fanfare, with fault lines emerging around agricultural protections, automotive tariffs, terror designations, and
geopolitical calculations involving Russia and China.
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In contrast there is continued European imports of Russian LNG and refined products.
This complex interplay now sits at a precarious juncture, where trade negotiators, energy ministers, counterterrorism officials, and even corporate legal counsels like those
representing the Adani Group are engaged in parallel and, often, interlinked conversations with Washington.
What emerges is not a neat picture of bilateral progress, but rather a dense assortment of interests, sometimes converging, more often colliding.
Agriculture and Automotive: The Tariff Roadblock
India’s refusal to liberalize its agriculture sector has become the defining deadlock in ongoing trade talks with the U.S. Despite a temporary suspension of reciprocal tariffs extended until
August 1, the Trump administration continues to pressure New Delhi to permit imports of American agricultural and dairy products, including genetically modified crops.
India's position is consistent: domestic food security, farmer livelihoods, and rural economies, where over 60% of India’s population still draws its sustenance, cannot be sacrificed at the altar of liberal trade.
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What emerges is not a neat picture of bilateral progress...
Yet, for Washington, agriculture is more than a market, it’s a precedent.
If India gets a “pass” on agriculture in a bilateral trade deal, it weakens the American hand in future negotiations with Japan and the EU, who too resist U.S. agri-exports.
The automotive impasse adds another layer.
The U.S. wants India to lower import duties on car components to near-zero.
India, conscious of its emerging EV ambitions and “Make in India” drive, remains hesitant. Tariff reductions, it argues, may hurt its nascent auto manufacturing and auto-parts MSMEs,
one of the few sectors where India is globally competitive.
Energy Security and the Russia Question
While trade talks simmer, energy diplomacy has escalated. India’s trade deficit in goods may be widening, $67.26 billion in Q1 FY26, but services exports (up 11% to $98.13 billion) and
cheap Russian crude have kept its macroeconomic stability intact.
India now sources 36% of its crude oil from Russia, overtaking China as Moscow’s top buyer.
Enter the geopolitical landmine: the U.S. Senate's Russian Sanctions Act, 2025, which proposes punitive duties of up to 500% on countries buying Russian oil.
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The U.S. wants India to lower import duties on car components to near-zero
The threat of “secondary sanctions”, including 100% tariffs, looms large over India, Brazil, and China.
In contrast there is continued European imports of Russian LNG and refined products.
According to the Union Petroleum Ministry, India now buys oil from 40 countries, up from 27, a strategic hedge against western sanctions.
Still, any aggressive U.S. action under the Russian sanctions bill would strike at the underbelly of India’s trade strategy.
Refined petroleum constitutes about 15% of India’s exports.
If American and European sanctions extend to Indian refiners processing Russian crude, the ripple effects could be severe, not just economically, but diplomatically.
Mini Deals, Mega Stakes
Despite the impasse, backroom diplomacy continues.
New Delhi and Washington remain in active talks for a broader Bilateral Trade Agreement (BTA), targeted for September-October 2025. However, a “mini deal”, based on what one
official called “what India has to offer”, could be sprung by President Trump, as was done with Vietnam and Indonesia.
These past instances have left negotiators blindsided by unilateral announcements from the White House, sometimes diverging from what was actually negotiated.
This raises real concern in South Block: will India be pulled into a transactional trap, where strategic autonomy is bartered for temporary trade concessions? Or can India secure a
principled trade arrangement that accounts for its sensitivities on food security, industrial growth, and energy access?
Security Cooperation and Terror Designations
Amidst economic wrangling, Indo-U.S. ties have found alignment in counterterrorism. The U.S. recently designated The Resistance Front (TRF), a Lashkar-e-Taiba proxy, as a Foreign Terrorist Organisation (FTO).
The TRF, responsible for several deadly attacks in Jammu & Kashmir, including the killing of 26 civilians in Pahalgam in April 2025, had evaded international scrutiny by rebranding after the dilution of Article 370 in 2019.
India has no option but to welcome the designation as a strong message against cross-border terrorism.
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The U.S. recently designated The Resistance Front (TRF), as a Foreign Terrorist Organisation (FTO)
It seems to be is a strong affirmation of India-U.S. counterterrorism cooperationand that what the External Affairs Ministry has to be satisfied with. Though it does not make much of a difference in long run.
With digital platforms being weaponized by groups like TRF for propaganda and recruitment, intelligence sharing and tech monitoring are now key elements of the strategic partnership.
Yet, this convergence comes with expectations.
The U.S. seeks Indian support in isolating Russia and containing China.
In return, India seeks American action on Pakistan-based groups and leniency in strategic autonomy on Iran and Russia.
Whether this transactional calculus holds or crumbles under conflicting priorities remains to be seen.
Corporate Storms and Public Diplomacy: The Adani Undercurrent
Another subplot adding complexity to India-U.S. ties is the ongoing legal scrutiny of the Adani Group in U.S. courts. Far from a domestic corporate saga, this has diplomatic overtones.
Gautam Adani, long seen as a key player in India’s infrastructure expansion, is facing both criminal and civil charges in the U.S., including a pending indictment and SEC investigation.
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The U.S. seeks Indian support in isolating Russia and containing China.
Despite public messaging by the group claiming exoneration, court documents tell a different story: no acquittal has been granted, charges remain live, and legal procedures are in motion.
Whether these cases get quietly settled, dismissed, or escalated will have ramifications, not only for Adani’s international investments but also for U.S. perceptions of Indian corporate governance.
This could cast a shadow on India's image as an investment destination, particularly at a time when New Delhi is courting American capital in semiconductors, green tech, and infrastructure.
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The Tightrope of Strategic Autonomy
India stands today at a challenging crossroads in its engagement with the United States. It seeks closer ties, economic, technological, and strategic, but without becoming a junior partner or a policy captive.
The U.S., on its part, wants reliable allies that align with its geopolitical aims but struggles to accommodate New Delhi’s need for sovereignty, self-reliance, and domestic consensus.
Trade talks are not just about soybeans and car parts; they are about how two major powers reconcile national interest with global responsibility.
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For now, the India-U.S. relationship remains a dance of convergence and divergence, often tense, but always consequential
Terror cooperation is not merely tactical, it tests how deeply aligned the two are in their long-term threat perceptions.
And energy security is no longer just about oil; it’s about whether the U.S. will recognize India’s right to chart its own path in a multipolar world.
For now, the India-U.S. relationship remains a dance of convergence and divergence, often tense, but always consequential.
What is clear is that the road ahead demands both strategic patience and creative diplomacy.
The stakes are too high for either side to settle for short-term wins at the cost of long-term trust.
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