India–US trade talks are back in active mode and officials say a “first tranche” is close—but tariffs and geopolitics. Here’s what’s delaying the deal and whether the US could unwind tariffs on India.

When Will the India–US Trade Deal Happen?

A news analysis on timelines, tariff chances, and India’s market + MSME impact

As of mid-January 2026, the India–US trade track has shifted from “stalled” to “nearing an announcement”—but still without a date. India’s commerce leadership has publicly indicated the agreement is “very close,” with negotiating teams continuing discussions virtually and refusing to commit to a deadline.

That combination—“near” yet “no timeline”—is not diplomatic vagueness. It reflects the reality that the remaining issues are exactly the kind that are politically hardest to close: tariffs and trade remedies, agriculture and market access, regulatory alignment, and strategic conditions shaped by geopolitics.

So, when could it realistically happen?

The most realistic timeline: “First tranche” soon, full deal later

What’s taking shape looks less like a single, sweeping Free Trade Agreement and more like a staged trade package—a “first tranche” that can be announced once the final political clearances are aligned. That framing is now being used in Indian reporting and official commentary.

In parallel, there are clear signs the two sides have re-activated structured engagement—down to scheduled calls and official statements about continued negotiations.

My read from the current signal flow (not a guarantee):

Near-term outcome: a limited package covering a narrow set of tariff/market-access adjustments, facilitation measures, and a mechanism for continued talks.
Medium-term outcome: a wider agreement only after the “hard files” (farm trade, high tariffs, trade remedies, digital trade/standards) are settled or ring-fenced.

This is also consistent with how both countries have previously used the Trade Policy Forum and joint statements to move forward in modular steps.

Why is the deal taking so much time? Five real frictions

1) Tariffs became geopolitically “loaded,” not just economic

In the current phase, tariffs aren’t only about protecting domestic producers—they’re being used as strategic levers. Recent reporting links trade tension to broader geopolitical flashpoints (including energy choices and sanctions-related positioning), which makes the trade file harder to isolate.

When tariffs become instruments of geopolitical signaling, negotiators lose flexibility—because any relaxation is interpreted as a strategic concession.

2) The US tariff architecture is messy: not one lever, but many

Even if Washington wants to “end tariffs,” it’s rarely one switch. Tariffs and duties touching India can come from different buckets—general tariffs, “reciprocal” actions, and trade-remedy frameworks.

A particularly stubborn category is Section 232 (steel/aluminium) style actions—where national security rationales make rollbacks politically sensitive, even when friendly partners are involved. Separate trade resources tracking these measures show how broad and persistent these actions can be.

Bottom line: removing tariffs is possible, but often requires country exemptions, quotas, product-level exclusions, or staged reductions—not a single “tariffs end” announcement.

3) Market access: agriculture, dairy, and standards remain politically explosive

This is the classic roadblock. The US typically pushes for deeper access in agriculture and processed foods; India’s domestic politics, smallholder realities, and standards regime make sudden opening difficult.

Even when the deal is “close,” agriculture and related standards are often left for later or traded off against other wins—because they generate the strongest domestic pushback.

4) India’s ask is larger than tariffs—it wants predictability

Indian exporters can survive a tariff; what damages investment and supply chains is uncertainty—the risk of sudden changes, compliance burdens, or snap actions.

That’s why India’s likely focus is not only “reduce duties,” but:

stable, published pathways for duty relief,
clear rules of origin and documentation,
fewer surprise compliance escalations.

5) Politics, optics, and sequencing: “announce when both are ready”

Indian officials have explicitly said they won’t put a deadline, even while calling it “very close.”
That usually means the negotiators may be done on paper, but leaders are still aligning:

which sector gets protected,
what can be “sold” domestically,
and what is bundled into the first announcement.

Geopolitical scenario: why this deal matters more than trade

Three strategic currents are shaping the timing and content:

1) Supply chain strategy: semiconductors and “trusted” ecosystems

Recent reporting indicates the US is pushing allied supply chain initiatives and inviting India into new frameworks around silicon/AI supply chains.
That increases the incentive to keep trade relations functional—because industrial policy needs predictable partners.

2) Energy and sanctions cross-currents

Trade is increasingly linked with energy sourcing and sanctions positioning, which can either accelerate a deal (to keep a partner close) or slow it (if conditions are attached).

3) India’s diversification strategy: EU track heats up

India is simultaneously accelerating other trade tracks, with reporting indicating the India–EU deal is “close.”
This matters because it changes negotiating leverage: the US knows India has alternatives for market access, and India knows it must hedge export risk.

Stock market impact: where Dalal Street feels it first

A credible India–US trade package typically moves markets through earnings visibility and multiple expansion for globally exposed sectors.

Likely winners if a deal is announced (or tariffs ease)

Export-heavy, price-sensitive segments benefit first:

Textiles & apparel (tariffs directly hit competitiveness)
Gems & jewellery (high exposure to US demand cycles)
Auto components / industrial engineering (supply chain confidence)
Select chemicals & specialty manufacturing (order flow + margins)

If the package includes facilitation and faster clearances, it can also improve sentiment in logistics and mid-cap exporters where uncertainty discounts valuations.

Likely “mixed” sectors

IT services: less about goods tariffs, more about macro sentiment, visa/regulatory climate, and enterprise spending. A trade thaw can help sentiment, but fundamentals depend on US tech budgets.
Pharma: generally resilient, but sensitive to regulatory and pricing narratives.

The risk scenario markets watch

Recent reporting has linked tariff escalation and trade tension with investor sentiment and currency pressure.
If talks wobble, markets may price:

lower earnings visibility for exporters,
weaker INR or higher hedging costs,
and a “risk-off” tilt in globally exposed midcaps.

MSME perspective: what India’s smaller exporters need from this deal

For MSMEs, the India–US trade deal is not an abstract diplomatic trophy—it’s about order survival.

What MSMEs need most

Tariff relief or predictable pathways
Even partial reductions in key HS codes can revive order pipelines.
Simpler compliance, fewer surprises
SME exporters struggle more with documentation burdens, sudden rule changes, and port-level unpredictability than large firms.
Faster dispute resolution + clearer standards
If standards equivalence, testing recognition, or clearer certification pathways are included, MSMEs can scale without hiring compliance armies.
Financing confidence
Banks/NBFCs become more willing to finance export working capital when trade policy risk falls.

What MSMEs should do now (deal or no deal)

Hedge currency exposure more systematically (even simple invoicing discipline helps).
Diversify export destinations (EU momentum matters here).
Upgrade traceability and origin documentation—because modern deals increasingly enforce it.

How likely is the US to end tariffs on India?

“End” is the wrong word. The realistic question is: how much tariff burden can be reduced, how fast, and in what form?

What is plausible

Product-level relief in priority export categories
Country-specific exclusions/quotas for sensitive categories (especially metals-linked items)
Phased reductions tied to compliance, purchases, or sector commitments
A standstill clause: no new escalations while talks continue

What is less plausible (soon)

A sweeping, across-the-board removal of all elevated tariffs in one step—especially where tariffs are embedded in broader US trade-remedy/national-security frameworks.

Why the US might still offer meaningful relief

Because the strategic incentive is strong: keeping India anchored in “trusted supply chain” and security/tech alignment frameworks makes tariff moderation strategically useful.

The bottom line

India–US trade negotiations are active, publicly described as close to the finish line, and being shaped into a “first tranche” that can be announced without settling every hard issue.

The reason it’s taking so long is simple: the last mile is dominated by the hardest political files—tariffs that double as geopolitical tools, US trade-remedy structures that don’t unwind easily, and market-access asks that are domestically sensitive in India and the US.

For Indian markets, the first reaction will be sectoral: exporters and globally exposed cyclicals may re-rate on visibility. For MSMEs, the deal matters if it converts into specific tariff lines, simpler compliance, and stable policy behavior—not just a headline.

When Will the India–US Trade Deal Happen—and What It Means for Dalal Street, MSMEs and Tariffs