Efforts to finalize a comprehensive trade agreement between the United States and India encountered significant headwinds during the administration of former President Donald Trump, with specific trade policies enacted at the time casting a long shadow over bilateral deal prospects. The period was marked by increased trade friction, which complicated negotiations for a mutually beneficial pact aimed at enhancing economic ties between the two nations.

During his presidency, Trump pursued an "America First" trade agenda, characterized by the imposition of tariffs and a focus on reducing perceived trade deficits. This approach led to a series of actions that directly impacted US-India trade relations. Notably, the U.S. implemented tariffs on steel and aluminum imports globally, including from India, under Section 232 of U.S. trade law, citing national security concerns. These tariffs, 25% on steel and 10% on aluminum, were met with disappointment from New Delhi, which argued for an exemption.

A key turning point came in June 2019 when the Trump administration terminated India's designation as a beneficiary developing country under the Generalized System of Preferences (GSP) program. This decision removed duty-free access for approximately $5.6 billion worth of Indian exports to the U.S., impacting sectors ranging from textiles to agricultural products. The U.S. cited India's failure to provide "equitable and reasonable access to its markets" as the reason for the withdrawal. In response, India imposed retaliatory tariffs on 28 U.S. products, including certain agricultural goods, almonds, and walnuts, effective the same month.

These actions created a challenging environment for advancing a broader trade agreement that both sides had been negotiating. The proposed deal aimed to address market access issues, reduce tariffs on various goods, and streamline trade regulations. However, the escalating trade tensions hindered progress on critical areas such as:

  • Market access for agricultural products: U.S. demands for greater access for products like dairy and medical devices met resistance over Indian regulations and tariffs.
  • Data localization norms: India's push for data storage within its borders created hurdles for U.S. technology and e-commerce companies.
  • Intellectual property rights: Ongoing disagreements persisted regarding protection and enforcement, particularly in the pharmaceutical sector.
  • Industrial tariffs: Differing expectations on tariff reductions for various manufactured goods and automotive components proved difficult to reconcile.

The resulting lack of consensus prevented the finalization of even a limited trade package, which was anticipated as a precursor to a more extensive free trade agreement. While discussions continued between trade representatives from both nations, the foundational disputes over tariffs and market access remained largely unresolved by the end of the Trump administration.

As of the current period, the shadow of these past trade disputes continues to influence bilateral trade discussions. While the Biden administration has sought to reset certain aspects of U.S. trade policy, the underlying challenges in US-India trade relations persist. Both nations are engaged in ongoing dialogues through various mechanisms, including the U.S.-India Trade Policy Forum, to navigate existing barriers and explore new avenues for cooperation. The long-term trajectory of a comprehensive trade deal hinges on finding common ground on market access, tariff structures, and regulatory frameworks that align with the strategic economic interests of both the United States and India.