The European Centre for Strategic Studies and Policy (ECSAP)
The relationship between the United States and India has become one of the most consequential strategic partnerships of the emerging international order. Washington increasingly regards New Delhi as an indispensable actor in the Indo-Pacific, particularly as competition with China reshapes American security and economic policy. India, meanwhile, sees closer relations with the United States as an important source of investment, advanced technology, defence cooperation and access to one of the world’s largest consumer markets. Yet despite this growing strategic convergence, the two countries have repeatedly struggled to translate their political partnership into a stable and comprehensive trade relationship.
The difficulty is striking because both governments have repeatedly approached the threshold of an agreement. During Donald Trump’s first administration, negotiations focused on a relatively limited package involving market-access disputes in sectors including medical devices, information technology and agricultural products. By early 2020, an agreement appeared possible, but the negotiations ultimately stalled because the remaining concessions were politically difficult for both sides. The experience established a pattern that has continued to shape the relationship: negotiations advance rapidly when strategic momentum is strong, only to slow when they reach the most sensitive domestic economic interests.
That pattern returned during Trump’s second administration. Indian Prime Minister Narendra Modi visited Washington shortly after Trump’s return to office, and the two leaders agreed to pursue a comprehensive bilateral trade agreement. Negotiations initially advanced quickly, creating expectations that India might become one of the first major economies to reach a new trade arrangement with Washington. By mid-2025, however, the political environment deteriorated as the Trump administration intensified criticism of India’s tariff and regulatory policies while also targeting New Delhi over its continued purchases of Russian oil. Trade policy was no longer isolated from geopolitics; it had become one of the instruments through which Washington attempted to influence India’s broader strategic behaviour.
This created a fundamental problem for New Delhi. India wants a deeper economic relationship with the United States, but it remains determined to preserve what it describes as strategic autonomy. Its relationship with Russia, including energy and defence ties, is part of a broader foreign-policy tradition in which India seeks partnerships with competing powers without becoming fully aligned with any one of them. American efforts to connect trade privileges with Indian foreign-policy decisions therefore risk colliding with one of the most deeply rooted principles of Indian diplomacy.
A new opportunity emerged in February 2026 when Trump and Modi again sought to stabilise the relationship. According to the source material, the two leaders agreed that the reciprocal tariff affecting India would fall from 25 percent to 18 percent and that an additional tariff associated with India’s purchases of Russian oil would be removed. Shortly afterwards, Washington announced a Framework Agreement intended to establish the foundations of a legally binding Interim Agreement. Once again, the two countries appeared close to overcoming years of unsuccessful negotiations.
The environment changed dramatically after the US Supreme Court struck down tariffs imposed under the International Emergency Economic Powers Act in February. Those tariffs had become an important source of leverage for the administration in negotiations with several trading partners, including India. Their removal forced Washington to reconsider the legal mechanisms available for implementing its tariff strategy. The administration subsequently shifted toward investigations under Section 301 of the Trade Act of 1974, including investigations related to forced labour and excess industrial capacity.
This legal shift introduced additional uncertainty into the negotiations. Section 301 can provide the US government with considerable authority to impose trade measures, but it normally requires investigations and evidence demonstrating that foreign practices are unreasonable, discriminatory or harmful to American commerce. That process is more targeted and procedurally demanding than the broad tariff approach previously pursued under IEEPA. For India, the result is uncertainty over what tariff environment will ultimately emerge and whether an agreement concluded with Washington would actually provide Indian exporters with a meaningful competitive advantage.
This point is central to understanding India’s current negotiating position. New Delhi does not simply want lower American tariffs. It wants confidence that Indian exporters will receive treatment that is competitive relative to other economies seeking access to the US market. A nominal reduction in tariffs would have limited strategic value if competing producers in neighbouring Asian economies ultimately received more favourable treatment. India is therefore negotiating not only over the absolute level of American tariffs but over its relative position within Washington’s increasingly differentiated global tariff system.
The issue illustrates how dramatically the logic of trade negotiations has changed. Traditional negotiations focused primarily on lowering barriers between two economies. The emerging tariff environment means governments increasingly calculate how their treatment compares with that received by competitors. Preferential market access becomes a strategic asset rather than simply a commercial benefit. For India, which wants to establish itself as a major alternative manufacturing hub, relative competitiveness is particularly important.
India’s domestic political economy also explains why negotiations have proved so difficult. Agriculture remains among the country’s most politically sensitive sectors because a vast population depends directly or indirectly on the rural economy. Greater access for American agricultural products can therefore become politically controversial regardless of the overall economic benefits of an agreement. The Indian government must balance international market opening with the interests of farmers, domestic manufacturers and industries that remain protected from foreign competition.
At the same time, India’s economic ambitions have changed. New Delhi is no longer satisfied with functioning primarily as a large consumer market for foreign companies. It wants to become a major manufacturing, technological and industrial power. Trade policy is therefore increasingly linked to industrial strategy. Foreign investment is welcome when it strengthens domestic production, creates employment, transfers technology or integrates India into global supply chains. Liberalisation that simply increases imports without developing Indian productive capacity is politically more difficult to defend.
The United States is experiencing its own transformation. Washington continues to demand greater access to foreign markets while simultaneously embracing tariffs, industrial subsidies, reshoring and strategic protection of important sectors at home. The disagreement between Washington and New Delhi should therefore not be understood simply as a confrontation between a protectionist India and a liberal United States. Both countries increasingly practice different forms of economic nationalism. Their dispute concerns which industries should receive protection, which markets should open and how economic interdependence should serve national strategic objectives.
Behind these commercial disagreements stands China. Washington’s interest in India extends far beyond bilateral trade. India possesses the demographic scale, geographic position, industrial potential and military capabilities necessary to influence the long-term Asian balance of power. A deeper economic partnership between Washington and New Delhi could accelerate diversification of global supply chains away from China and encourage American companies to expand manufacturing and investment in India.
This makes persistent trade disagreements strategically costly for Washington. If the United States regards India’s rise as beneficial to the Indo-Pacific balance of power, maximising short-term commercial concessions from New Delhi may occasionally conflict with the longer-term objective of strengthening India as an alternative economic centre in Asia. Washington therefore faces a difficult calculation between protecting American producers and helping construct a stronger Indian industrial economy capable of balancing Chinese influence.
India confronts the reverse dilemma. Greater integration with the American economy could accelerate industrial development and provide access to investment, technology and export markets. But excessive dependence on the United States could undermine the strategic autonomy New Delhi has spent decades preserving. India therefore wants American economic cooperation without American economic dominance. This helps explain why negotiations that appear straightforward from a commercial perspective become much more complicated when viewed through India’s strategic calculations.
For Europe, these developments carry particular importance. The European Union and India managed to overcome their own long history of difficult trade negotiations and conclude an agreement in January 2026, according to the source material. The breakthrough demonstrated that India’s negotiating positions are not permanently immovable. When sufficient political commitment exists and both sides perceive strategic advantages from compromise, long-running disagreements can be resolved.
Europe’s achievement creates a potentially important strategic window. While Washington and New Delhi continue struggling to establish a predictable trade framework, European companies have an opportunity to strengthen their positions in India’s expanding market. The importance extends beyond traditional trade. India’s demand for infrastructure, advanced manufacturing, clean technology, digital systems, pharmaceuticals, defence equipment and investment creates opportunities for Europe to establish deeper industrial relationships with one of the world’s most consequential emerging powers.
The European Union should therefore avoid viewing its agreement with India simply as another commercial achievement. It can become an instrument of European geopolitical strategy. Europe has fewer military capabilities than the United States to project power across the Indo-Pacific, but it possesses another major source of influence: the scale of its market, industrial expertise, investment capacity and regulatory power. Economic integration with India can provide Europe with a form of strategic influence that does not depend primarily on military presence.
The current difficulties between Washington and New Delhi may even strengthen Europe’s position. India has consistently sought to avoid excessive dependence on any single great power. Stronger relations with Europe allow New Delhi to deepen economic integration with Western economies while preserving room for strategic manoeuvre. Europe can therefore offer something valuable: partnership without requiring India to choose between geopolitical blocs.
A broader three-way economic competition is consequently emerging around India. China retains enormous manufacturing capacity and deeply established commercial connections. The United States offers technology, capital, defence cooperation and access to a massive consumer market. Europe offers another vast market, advanced industrial capabilities, investment and an increasingly institutionalised economic partnership. India is positioned to engage all three while attempting to maximise its own strategic autonomy.
This ability to pursue economic multi-alignment may become one of India’s greatest geopolitical advantages. New Delhi can cooperate with Washington on defence and Indo-Pacific security, deepen commercial integration with Europe, maintain selected relationships with Russia and simultaneously compete and trade with China. Rather than joining a fixed geopolitical bloc, India is attempting to construct a network of overlapping partnerships that increase its freedom of action.
For Washington, breaking the cycle of failed negotiations will probably require sustained political intervention. Technical negotiating teams can resolve tariff schedules and regulatory details, but they cannot determine how much political risk Modi should accept by opening sensitive sectors or how much preferential treatment Trump should provide India compared with other trading partners. Those decisions ultimately require leadership-level compromises.
The fundamental requirement is therefore predictability. India needs confidence that concessions made today will produce durable access to the American market rather than being undermined by another shift in US tariff policy. American businesses similarly need confidence that Indian market-opening commitments will actually be implemented. Without that mutual confidence, even a signed agreement could fail to generate the investment and supply-chain changes both governments want.
The dispute also demonstrates that twenty-first-century trade policy can no longer be separated from national security. Governments are increasingly concerned not simply with how much they trade but with what they trade, where critical goods are manufactured and which countries control strategic supply chains. Semiconductors, artificial intelligence infrastructure, critical minerals, pharmaceuticals, telecommunications equipment and advanced manufacturing have transformed economic policy into an extension of geopolitical strategy.
A successful U.S.–India agreement therefore does not necessarily need to resemble the comprehensive free-trade agreements of previous decades. Its strategic value could come from establishing predictable frameworks for technology, manufacturing investment, critical supply chains and strategically important goods. Eliminating every tariff may be less important than creating sufficient economic certainty for companies to make long-term investments.
For European policymakers, the continuing negotiations should be watched closely. Europe’s current advantage will not necessarily last. If Washington and New Delhi eventually conclude a major agreement, American companies could rapidly intensify competition for investment opportunities and market share in India. The EU must therefore convert its existing trade framework into actual economic integration while the opportunity exists. Agreements create possibilities; implementation determines strategic influence.
The wider lesson is that the U.S.–India trade deadlock reflects one of the defining contradictions of the emerging multipolar world. Countries can share strategic interests without becoming natural economic allies. Washington and New Delhi increasingly cooperate on security and technology while simultaneously protecting domestic industries and resisting economic dependence. Strategic convergence does not automatically eliminate economic nationalism.
The European experience demonstrates, however, that these obstacles are not insurmountable. Agreements become possible when political leaders decide that the strategic benefits of integration exceed the domestic advantages of extracting additional concessions. Washington and New Delhi appear increasingly close to that calculation, but their repeated failures demonstrate that proximity to an agreement is not the same as political readiness to conclude one.
For The European Centre for Strategic Studies and Policy (ECSAP), the most important European conclusion is that Brussels should not simply observe the U.S.–India negotiations from the sidelines. The competition to build the deepest economic relationship with India is becoming part of the wider struggle to shape the twenty-first-century international order. India represents not only a vast market but also a potential manufacturing centre, technological power and geopolitical pole in an increasingly fragmented global system.
The United States brings military power, advanced technology and strategic weight. China brings manufacturing scale and deeply established commercial networks. Europe brings capital, industry, regulatory influence and a newly strengthened economic framework with New Delhi. India, meanwhile, increasingly possesses something all three major economic centres want: the ability to choose among them.
The real question is therefore larger than whether Washington and New Delhi can finally sign a trade agreement. It is whether the United States can transform strategic partnership with India into lasting economic integration—and whether Europe can use the time before that happens to establish itself as an indispensable economic and strategic partner for India.
