Missed signals, lost deal: How India-US trade talks collapsed

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1. SS

   After five rounds of trade negotiations, Indian officials were so confident of securing a favourable deal with the United States that they even signalled to the media that tariffs could be capped at 15%.
   Indian officials expected U.S. President Donald Trump to announce the deal himself weeks before the August 1 deadline. The announcement never came.

   New Delhi is now left with the surprise imposition of a 25% tariff on Indian goods from Friday, along with unspecified penalties over oil imports from Russia, while Trump has closed larger deals with Japan and the EU, and even offered better terms to arch-rival Pakistan.
   Interviews with four Indian government officials and two U.S. government officials revealed previously undisclosed details of the proposed deal and an exclusive account of how negotiations collapsed despite technical agreements on most issues.

   The officials on both sides said a mix of political misjudgment, missed signals and bitterness broke down the deal between the world’s biggest and fifth-largest economies, whose bilateral trade is worth over $190 billion.
   The White House, the U.S. Trade Representative office, and India’s Prime Minister’s Office, along with the External Affairs and Commerce ministries, did not respond to emailed requests for comment.
   India believed that after visits by Indian Trade Minister Piyush Goyal to Washington and U.S. Vice President J.D. Vance to Delhi, it had made a series of deal-clinching concessions.
   New Delhi was offering zero tariffs on industrial goods that formed about 40% of U.S. exports to India, two Indian government officials told Reuters.

   Despite domestic pressure, India would also gradually lower tariffs on U.S. cars and alcohol with quotas and accede to Washington’s main demand of higher energy and defence imports from the U.S., the officials said.
   “Most differences were resolved after the fifth round in Washington, raising hopes of a breakthrough,” one of the officials said, adding negotiators believed the U.S. would accommodate India’s reluctance on duty-free farm imports and dairy products from the U.S.
   It was a miscalculation. Trump saw the issue differently and wanted more concessions.
   “A lot of progress was made on many fronts in India talks, but there was never a deal that we felt good about,” said one White House official.

   “We never got to what amounted to a full deal – a deal that we were looking for.”

   OVER-CONFIDENCE AND MISCALCULATION

   Indian Prime Minister Narendra Modi, who visited Washington in February, agreed to target a deal by fall 2025, and more than double bilateral trade to $500 billion by 2030.
   To bridge the $47 billion goods trade gap, India pledged to buy up to $25 billion in U.S. energy and boost defence imports.

   But officials now admit India grew overconfident after Trump talked up a “big” imminent deal, taking it as a signal that a favourable agreement was in hand. New Delhi then hardened its stance, especially on agriculture and dairy, two highly sensitive areas for the Indian government.

   “We are one of the fastest growing economies, and the U.S. can’t ignore a market of 1.4 billion,” one Indian official involved in the negotiations said in mid-July.

   Negotiators even pushed for relief from the 10% average U.S. tariff announced in April, plus a rollback of steel, aluminium and auto duties.

   Later, India scaled back expectations after the U.S. signed trade deals with key partners including Japan, and the European Union, hoping it could secure a similar 15% tariff rate with fewer concessions.

   That was unacceptable to the White House. “Trump wanted a headline-grabbing announcement with broader market access, investments and large purchases,” said a Washington-based source familiar with the talks.
   An Indian official acknowledged New Delhi wasn’t ready to match what others offered.

   South Korea, for example, struck a deal just before Trump’s August 1 deadline, securing a 15% rate instead of 25% by offering $350 billion in investments, higher energy imports, and concessions on rice and beef.

   This range plot displays U.S. President Donald Trump’s tariff rates or the most recent previously announced or threatened tariff rates for the U.S.’s top trading partners on Aug. 1, 2025.

   This range plot displays U.S. President Donald Trump’s tariff rates or the most recent previously announced or threatened tariff rates for the U.S.’s top trading partners on Aug. 1, 2025.

   COMMUNICATION BREAKDOWN

   “At one point, both sides were very close to signing the deal,” said Mark Linscott, a former U.S. Trade Representative who now works for a lobby group that is close to the discussions between the two nations.
   “The missing component was a direct line of communication between President Trump and Prime Minister Modi.”
   A White House official strongly disputed this, noting other deals had been resolved without such intervention.
   An Indian government official involved in the talks said Modi could not have called, fearing a one-sided conversation with Trump that could put him on the spot.

   However, the other three Indian officials said Trump’s repeated remarks about mediating the India-Pakistan conflict further strained negotiations and contributed to Modi not making a final call.

   “Trump’s remarks on Pakistan didn’t go down well,” one of them said. “Ideally, India should have acknowledged the U.S. role while making it clear the final call was ours.”

   A senior Indian government official blamed the collapse on poor judgment, saying top Indian advisers mishandled the process.

   “We lacked the diplomatic support needed after the U.S. struck better deals with Vietnam, Indonesia, Japan and the EU,” the official said.
   “We’re now in a crisis that could have been avoided.”
   Trump said on Tuesday he would increase the tariff on imports from India from the current rate of 25% “very substantially” over the next 24 hours and alleged that New Delhi’s purchases of Russian oil were “fuelling the war” in Ukraine.
   WAY FORWARD
   Talks are ongoing, with a U.S. delegation expected in Delhi later this month and Indian government officials still believe the deal can be salvaged from here.
   “It’s still possible,” one White House official said.
   The Indian government is re-examining areas within the farm and dairy sectors where concessions can be made, the fourth official said. On Russian oil, India could reduce some purchases in favour of U.S. supplies if pricing is matched.
   “It likely will require direct communication between the prime minister and the president,” said Linscott.
   “Pick up the phone. Right now, we are in a lose-lose. But there is real potential for a win-win trade deal.”

2. Basically, Trump wanted India to kiss the ring and confirm to the world that they kissed the ring.

3. I would agree with the article if this was between two professional negotiating teams.
   The problem is I doubt even the White house knows what tariff Trump will impose next.

   India had recently signed trade deals with Australia and the UK and we are close to signing
   one with the EU. There were similar problems of India allowing access to agricultural products and dairy. There was no way we could agree to US demands when we said no to others (and our interlocutors understood our sensitivities). The deals with the UK and Australia were signed with give and take on both sides.

   The premise behind trade deals is that both sides seek to strengthen trade by removing bottlenecks, acting within WTO commitments and with compromise on both sides. A trade deal is not a mafia style shakedown. The Indian public was riled not just by Trump making repeated references to stopping the war, but hosting the Pak army chief (not the elected head of state) after the latter appeared at a state funeral of US & UN designated terrorists and reiterating Pakistan’s support for terror groups. He also referred to India being a dead economy, which is inaccurate when we are the 3rd largest in the world (in PPP) and the fastest growing in the G-20.

   I don’t see any statement from Japan, South Korea or Vietnam where they have agreed to the terms Trump says the have. There is a similar lack of clarity over the terms of the EU-US deal.

4. I think it is a direct impact from the border skirmish earlier in May. The series of fights basically proves that India has no proper means to keep that subcontinent in order. Pakistan, indeed, is much inferior in military power, but it can pose significant threat and damage to India.

   TBH, the capability of planning and execution shown by India in that air fight is very much impressive. I dare to say, except US, no NATO country can properly plan and execute an aerial raid with over 70 jet fighters in four to five fronts. But the loss is still unbelievable, and someone or something must be held accountable.

   For India, they really don’t think that is their fault since they have demonstrated their execution beautifully. PAF has some weapon systems from China, what could India do without F-35A and EA-18G? Nothing.

   However, for US, they really cannot admit that China is getting edge on military equipment over NATO, otherwise the confidence within NATO will collapse.

   That is a deadlock for Modi and Trump. They both want the other side to admit something that is one stone away from political, even biological suicide, and of course, they cannot agree on any deals.

5. It appears the Indian negotiators were far too naive and optimistic, the American negotiators were far too greedy and in the end Trump nuked the negotiating table when he decided he wouldn’t be getting the kind of announcement he wanted.

   From various articles, the sequence of events that led to this seems to be:

   1. In July, India offered to essentially meet the Americans halfway with immediate concessions on 40% of American industrial exports and gradually some consumer products. They also offered $25 billion of American oil purchases. With Trump announcing a ‘big deal with India’ they actually believed he was satisfied and would at least give them an interim trade deal.

   2. On the American side, Trump and his advisors wanted nothing less than an announcement that India would open up most or all of its economy *and* pledge $350 billion or more(comparable to South Korea, Japan and the EU) of US purchases.

   3. When it was clear that India wasn’t going to offer that much Trump brought up the Russian oil import(which he previously didn’t care about) to tighten the vice on India. The announcement on 25% tariffs is meant to go into effect immediately but the one on 50% is intentionally timed for 2 weeks in the future in order to pressure India to surrender.

   This is reminding me of Trump’s first attempt at a trade war, with China, when tariffs were going up to 100%, 200% and so on. He seems to have realised that India would be a much softer target for this kind of offensive.

   Meanwhile, the indications are that the current ‘truce’ where tariffs on China are only at 30% will be extended, even though the US has far more reason to resent China on all fronts than India. Probably because of their leverage on rare earth minerals, their willingless to bribe Trump’s cronies, and Trump’s preference for dictators.

6. Trump always sees everything as a zero sum game- I.e. I win, you lose kind of situation. So to force nations into a disproportional trade deal that overwhelmingly favors the US that he can sell to his voter base.

   One of the big holdup in the trade deal is : agriculture and dairy. Trump has no regard for India’s redlines on agriculture or dairy sectors, cannot care less for the developmental imperatives that form the fulcrum of India’s economic policies, and seeks New Delhi to commit to zero tariffs for American goods in exchange for high double-digit levy on Indian exports to the US. It is none of Trump’s concern, for instance, that India has zero appetite for genetically modified American agricultural crops, and zero tolerance for American dairy products fed on blood meal because a vast majority of Hindu Indians are vegetarians

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